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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. Temple, Jonathan, 1999. "A positive effect of human capital on growth," Economics Letters, Elsevier, vol. 65(1), pages 131-134, October.
  2. Philippe Aghion & Peter Howitt & Fabrice Murtin, 2011. "The Relationship Between Health and Growth: When Lucas Meets Nelson-Phelps," Review of Economics and Institutions, Università di Perugia, vol. 2(1).
  3. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  4. Daniel Cohen & Marcelo Soto, 2007. "Growth and human capital: good data, good results," Journal of Economic Growth, Springer, vol. 12(1), pages 51-76, March.
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  6. Francesco Caselli, 2005. "Accounting for Cross-Country Income Differences," CEP Discussion Papers dp0667, Centre for Economic Performance, LSE.
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  10. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  11. Andrés Erosa & Tatyana Koreshkova & Diego Restuccia, 2009. "How important is human capital? A quantitative theory assessment of world income inequality," Working Papers 2009-11, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
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  13. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
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  15. 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.
  16. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  17. Christian Morrisson & Fabrice Murtin, 2009. "The Century of Education," CEP Discussion Papers dp0934, Centre for Economic Performance, LSE.
  18. repec:hal:wpaper:halshs-00586751 is not listed on IDEAS
  19. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
  20. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
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  22. 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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