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Dynamic Skill Accumulation,Comparative Advantages,Compulsory Schooling and Earnings

  • Christian Belzil

    ()

    (CREST)

  • Jörgen Hansen

    (Concordia University, CIRANO, CIREQ and IZA)

  • Xingfei Liu

    (Concordia University)

We show that a calibrated dynamic skill accumulation model allowing for comparative advantages, can explain the weak (or negative) effects of schooling on productivity that have been recently reported (i) in the micro literature on compulsory schooling, ii) in the micro literature on estimating the distribution of ex-post returns to schooling, and (iii) in the macro literature on education and growth. The fraction of the population more efficient at producing skills in the market than in school is a pivotal quantity that determines the sign (and magnitude) of different parameters of interest. Our model reveals an interesting paradox; as low-skill jobs become more skill-enhancing (ceteris paribus), IV estimates of compulsory schooling become increasingly negative, and ex-post returns to schooling (inferred from a Roy model specification of the earnings equation) become negative for an increasing fraction of the population. This arises even if each possible input to skill production has a strictly positive effect. Finally, our model provides a foundation for the weak (or negative) effect education on growth measured in the empirical literature

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Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2012-01.

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Length: 38
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:crs:wpaper:2012-01
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  27. Julien Grenet, 2013. "Is Extending Compulsory Schooling Alone Enough to Raise Earnings? Evidence from French and British Compulsory Schooling Laws," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(1), pages 176-210, 01.
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