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Has the Expansion of Higher Education Led to Greater Economic Growth?

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  • Craig Holmes

Abstract

There is an enduring belief by UK policymakers that a large higher education sector is an important driver of long-run economic growth, which has been part of the narrative since the Robbins Report. Back then, there was plenty of conjecture and assumption, but strikingly little concrete evidence to support such a belief. This paper asks whether the evidence base has strengthened in the 50 years since it was published. It looks at a number of different growth equation specifications and, using international education data, attempts to draw out the contribution of both the number of, and the growth in, graduates since the 1960s. There are three main findings. Firstly, many growth relationships, including those estimated elsewhere in the literature, are quite sensitive to the countries included – which often depends on the variables used – and time period of analysis. I argue that, given these issues, growth equations should always be treated with caution. Secondly, and remembering this caveat, neither the increase nor the initial level of higher education is found to have a statistically significant relationship with growth rates both in the OECD and worldwide. This result is robust to numerous different specifications. Thirdly, there is some evidence, consistent with the existing literature, that levels of technical skills at the end of compulsory education matter. The employment of higher level technical skills (proxied by the number of employed researchers in an economy) is also a strong predictor of growth. This gives a possible mechanism linking the output of (some) of the higher education sector with economic growth. However, it does not imply that mass higher education necessarily leads to higher growth. This depends on the skills produced by an expanding tertiary sector and their utilisation (or underutilisation) in the jobs available to increasing numbers of graduates.

Suggested Citation

  • Craig Holmes, 2013. "Has the Expansion of Higher Education Led to Greater Economic Growth?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages 29-47, May.
  • Handle: RePEc:sae:niesru:v:224:y:2013:i:1:p:r29-r47
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    Citations

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    Cited by:

    1. Morimoto, Takaaki & Tabata, Ken, 2020. "Higher Education Subsidy Policy And R&D-Based Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 24(8), pages 2129-2168, December.
    2. SAM, Vichet, 2018. "Overeducation among graduates in developing countries: What impact on economic growth?," MPRA Paper 87674, University Library of Munich, Germany.
    3. William M. Bowen & Haifeng Qian, 2017. "State spending for higher education: Does it improve economic performance?," Regional Science Policy & Practice, Wiley Blackwell, vol. 9(1), pages 7-23, March.
    4. Eric A. Hanushek, 2017. "Education and the Growth-Equity Trade-Off," NBER Chapters, in: Education, Skills, and Technical Change: Implications for Future US GDP Growth, pages 293-312, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Economic growth; higher education; skills;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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