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Human Capital Quality and Aggregate Income Differences: Development Accounting for U.S. States

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  • Eric A. Hanushek
  • Jens Ruhose
  • Ludger Woessmann

Abstract

Although many U.S. state policies presume that human capital is important for state economic development, there is little research linking better education to state incomes. In a complement to international studies of income differences, we investigate the extent to which quality-adjusted measures of human capital can explain within-country income differences. We develop detailed measures of state human capital based on school attainment from census micro data and on cognitive skills from state- and country-of-origin achievement tests. Partitioning current state workforces into state locals, interstate migrants, and immigrants, we adjust achievement scores for selective migration. We use the new human capital measures in development accounting analyses calibrated with standard production parameters. We find that differences in human capital account for 20-35 percent of the current variation in per-capita GDP among states, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses.

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  • Eric A. Hanushek & Jens Ruhose & Ludger Woessmann, 2015. "Human Capital Quality and Aggregate Income Differences: Development Accounting for U.S. States," Economics Working Papers 15112, Hoover Institution, Stanford University.
  • Handle: RePEc:hoo:wpaper:15112
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    1. Human Capital Quality and Aggregate Income Differences: Development Accounting for U.S. States
      by maximorossi in NEP-LTV blog on 2016-03-01 18:12:27

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    Cited by:

    1. Eric A. Hanushek & Jens Ruhose & Ludger Woessmann, 2015. "Economic Gains for U.S. States from Educational Reform," NBER Working Papers 21770, National Bureau of Economic Research, Inc.
    2. Ludger Woessmann, 2016. "The Importance of School Systems: Evidence from International Differences in Student Achievement," Journal of Economic Perspectives, American Economic Association, vol. 30(3), pages 3-32, Summer.
    3. repec:gam:jsusta:v:9:y:2017:i:5:p:676-:d:96676 is not listed on IDEAS
    4. Deeken, Tim, 2015. "Schumpeterian growth with technological interdependence: An application to US states," Working Paper Series in Economics 75, Karlsruhe Institute of Technology (KIT), Department of Economics and Business Engineering.
    5. William F. Maloney & Felipe Valencia Caicedo, 2017. "Engineering Growth: Innovative Capacity and Development in the Americas," CESifo Working Paper Series 6339, CESifo Group Munich.

    More about this item

    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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