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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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  14. Andres Erosa & Tatyana Koreshkova & Diego Restuccia, 2007. "How Important is Human Capital? A Quantitative Theory Assessment of World Income Inequality," Working Papers tecipa-280, University of Toronto, Department of Economics.
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  17. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  18. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
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  22. repec:hal:wpaper:halshs-00586751 is not listed on IDEAS
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