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The Augmented Solow Model with Mincerian Schooling and Externalities

Author

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  • Carstensen Kai

    (Ifo Institut für Wirtschaftsforschung,Munich, Germany)

  • Hartmann Susanne

    (Deutsche Gesellschaft für technische Zusammenarbeit (GTZ), Dag-Hammarskjöld-Weg 1-5,Eschborn, Germany)

  • Gundlach Erich

    (Kiel Institute for the World Economy,Kiel, Germany)

Abstract

We combine the augmented Solow model with the Mincer equation to derive a specification that identifies an education externality within a production function framework. The previous empirical literature has not reached a consensus about the size of the education externality, which is given by the difference between the microeconomic and the macroeconomic return to education. Relative to our benchmark value that is based on a parameterization of the derived specification, we find that the estimated education externality is too large when the empirical model is not properly restricted, and appears to be absent when all control variables of the empirical model are properly accounted for. We note that the absence of an education externality is difficult to reconcile with observed levels of education subsidies for efficiency reasons.

Suggested Citation

  • Carstensen Kai & Hartmann Susanne & Gundlach Erich, 2009. "The Augmented Solow Model with Mincerian Schooling and Externalities," German Economic Review, De Gruyter, vol. 10(4), pages 448-463, December.
    • Handle: RePEc:bpj:germec:v:10:y:2009:i:4:p:448-463
    DOI: 10.1111/j.1468-0475.2009.00490.x
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    Cited by:

    1. Taro Takahashi, 2012. "Capital Growth Paths of the Neoclassical Growth Model," PLOS ONE, Public Library of Science, vol. 7(11), pages 1-5, November.
    2. Rasmus Thönnessen & Erich Gundlach, 2013. "The size of human capital externalities: cross-country evidence," Public Choice, Springer, vol. 157(3), pages 671-689, December.
    3. repec:bla:germec:v:10:y:2009:i::p:378-383 is not listed on IDEAS
    4. Bjarne S. Jensen, 2009. "Dynamic Extensions of the Solow Growth Model (1956): Editorial," German Economic Review, Verein für Socialpolitik, vol. 10(4), pages 378-383, November.
    5. Tomasz Brodzicki, 2015. "Shallow determinants of growth of Polish regions. Empirical analysis with panel data methods," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 39, pages 25-40.
    6. Bjarne S. Jensen & Ulla Lehmijoki, 2011. "Homothetic Multisector Growth Models," DEGIT Conference Papers c016_001, DEGIT, Dynamics, Economic Growth, and International Trade.
    7. Tomasz Brodzicki, 2012. "Augmented Solow Model with Mincerian Education and Transport Infrastructure Externalities," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 6(2), pages 155-170, July.
    8. Zhu, Yanyuan & Feng, Xiao, 2014. "China's national production function since 1997: A reinvestigation," Working Papers in Economics 2014,2, Bundeswehr University Munich, Economic Research Group.

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    Keywords

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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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