The Role of Education and Human Capital in Economic Development: An Empirical Assessment

Estimates of aggregate production functions from intercountry data have strengthened speculations that human capital is an important determinant of modern economic growth and a critical factor in explaining the convergence in growth across countries. For this macro literature to shed more light on the growth contribution of education and of other forms of human capital, measurers of the stock of human capital must be improved and disaggregatecl. In particular, connections between diet, disease, height, stature and labor productivity imply that aggregate growth theories should seek to incorporate health, as well as education. Micro economic studies of individual wage differentials derived from household surveys are available from many low income countries. A host of difficult to resolve econometric problems complicate the interpretation of the partial association between the logarithm of wage rates and a worker's schooling. Nonetheless, this association between wage productivity and schooling provides a useful, if imperfect, estimate of private returns. Policymakers should take account of wage differentials by level of education as both an indicator of private payoff to educational investments in a national labor market and a criterion in setting public priorities to foster more rapid growth and to promote a more equal distribution of personal income.