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Human Capital and Growth: Specification Matters

  • Sunde, Uwe

    ()

    (University of Munich)

  • Vischer, Thomas

    ()

    (University of Munich)

This paper suggests that the weak empirical effect of human capital on growth in existing cross-country studies is partly the result of an inappropriate specification that does not account for the different channels through which human capital affects growth. A systematic replication of earlier results from the literature shows that both, initial levels and changes in human capital, have positive growth effects, while in isolation, each channel often appears insignificant. Moreover, the effects are heterogeneous across countries with different levels of development. The results suggest that the effect of human capital is likely to be underestimated in empirical specifications that do not account for both channels. This study therefore complements alternative explanations for the weak growth effects of human capital based on outlier observations and measurement issues.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5991.

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Length: 41 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5991
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  1. Francesco Caselli, 2005. "Accounting for Cross-Country Income Differences," CEP Discussion Papers dp0667, Centre for Economic Performance, LSE.
  2. Cohen, Daniel & Soto, Marcelo, 2001. "Growth and Human Capital: Good Data, Good Results," CEPR Discussion Papers 3025, C.E.P.R. Discussion Papers.
  3. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  4. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
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  7. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
  8. Miguel Portela & Rob Alessie & Coenraad N. Teulings, 2006. "Measurement Error in Education and Growth Regressions," CESifo Working Paper Series 1677, CESifo Group Munich.
  9. Eric Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Discussion Papers 07-034, Stanford Institute for Economic Policy Research.
  10. Andrés Erosa & Tatyana Koreshkova & Diego Restuccia, 2010. "How Important Is Human Capital? A Quantitative Theory Assessment of World Income Inequality," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1421-1449.
  11. Christian Morrisson & Fabrice Murtin, 2009. "The Century of Education," CEE Discussion Papers 0109, Centre for the Economics of Education, LSE.
  12. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  13. de la Fuente, Angel & Doménech, Rafael, 2000. "Human Capital In Growth Regressions: How Much Difference Does Data Quality Make?," CEPR Discussion Papers 2466, C.E.P.R. Discussion Papers.
  14. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
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  18. Nadir Altinok & Hatidje Murseli, 2006. "International Database on Human Capital Quality," Post-Print halshs-00097099, HAL.
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  20. repec:hal:wpaper:halshs-00586751 is not listed on IDEAS
  21. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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