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A Reevaluation of the Effect of Human Capital Accumulation on Economic Growth Using Natural Disasters as an Instrument

  • Hideki Toya

    ()

    (Faculty of Economics, Nagoya City University, Yamanohata-1, Mizuho-cho, Mizuho-ku, Nagoya 467-8501, Japan.)

  • Mark Skidmore

    ()

    (Agricultural, Food and Resource Economics, Michigan State University, 208 Agriculture Hall, East Lansing, MI 48824, USA.)

  • Raymond Robertson

    ()

    (Department of Economics, Macalester College, 1600 Grand Avenue, Saint Paul, MN 55105-1899.)

Theoretic growth models and microeconomic evidence suggest that human capital accumulation is an important determinant of per capita income growth. However, early macroeconomic studies found a weak relationship between growth and human capital accumulation. While recent studies addressing outliers, measurement errors, and specification error are beginning to show larger positive effects, human capital endogeneity has received little attention. This article suggests that endogeneity is significant and finds that natural disasters are a good instrument for changes in schooling. Our resulting instrumental variable estimates are larger than our OLS estimates and are generally larger than those in previous studies.

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Article provided by Palgrave Macmillan in its journal Eastern Economic Journal.

Volume (Year): 36 (2010 Winter)
Issue (Month): 1 ()
Pages: 120-137

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Handle: RePEc:pal:easeco:v:36:y:2010:i:1:p:120-137
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