Skill-specific rather then General Education: A Reason for US-Europe Growth Differences?
In this paper, we develop a model of technology adoption and economic growth in which households optimally obtain either a concept-based, general' education or a skill-specific, vocational' education. General education is more costly to obtain, but enables workers to operate new technologies incorporated into production. Firms weigh the cost of adopting and operating new technologies against increased revenues and optimally choose the level of adoption. We show that an economy whose policies favor vocational education will grow slower in equilibrium than one that favors general education. Moreover, the gap between their growth rates will increase with the growth rate of available technology. By characterizing the optimal Ramsey education subsidy policy we demonstrate that the optimal subsidy for general education increases with the growth rate of available technology. Our theory suggests that European education policies that favored specialized, vocational education might have worked well, both in terms of growth rates and welfare, during the 60s and 70s when available technologies changed slowly. In the information age of the 80s and 90s when new technologies emerged at a more rapid pace, however, it may have suboptimally contributed to slow growth and may have increased the growth gap relative to the US.
|Date of creation:||Jan 2003|
|Date of revision:|
|Publication status:||published as Krueger, Dirk and Krishna B. Kumar. "Skill-Specific Rather Than General Education: A Reason For US-Europe Growth Differences?" Journal of Economic Growth 9(2): 167-207, June 2004|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lars Ljungqvist & Thomas J. Sargent, 1995.
"The European unemployment dilemma,"
Working Paper Series, Macroeconomic Issues
95-17, Federal Reserve Bank of Chicago.
- Lars Ljungqvist & Thomas J. Sargent, 1996. "The European Unemployment Dilemma," EUI-RSCAS Working Papers 36, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
- Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," SSE/EFI Working Paper Series in Economics and Finance 178, Stockholm School of Economics.
- Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
- Galor, Oded & Tsiddon, Daniel, 1997.
"Technological Progress, Mobility, and Economic Growth,"
American Economic Review,
American Economic Association, vol. 87(3), pages 363-82, June.
- Galor, O. & Tsiddon, D., 1996. "Technological Progress, Mobility and Economic Growth," Papers 13-96, Tel Aviv.
- Galor, Oded & Tsiddon, Daniel, 1996. "Technological Progress, Mobility, and Economic Growth," CEPR Discussion Papers 1413, C.E.P.R. Discussion Papers.
- Stefano Scarpetta & Andrea Bassanini & Dirk Pilat & Paul Schreyer, 2000. "Economic Growth in the OECD Area: Recent Trends at the Aggregate and Sectoral Level," OECD Economics Department Working Papers 248, OECD Publishing.
- Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
- 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.
- Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991.
"The Allocation of Talent: Implications for Growth,"
The Quarterly Journal of Economics,
MIT Press, vol. 106(2), pages 503-30, May.
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implications for Growth," NBER Working Papers 3530, National Bureau of Economic Research, Inc.
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implicationsfor Growth," University of Chicago - George G. Stigler Center for Study of Economy and State 65, Chicago - Center for Study of Economy and State.
- Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997.
"Capital-skill complementarity and inequality: a macroeconomic analysis,"
239, Federal Reserve Bank of Minneapolis.
- Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
- Paul Schreyer, 2000. "The Contribution of Information and Communication Technology to Output Growth: A Study of the G7 Countries," OECD Science, Technology and Industry Working Papers 2000/2, OECD Publishing.
- Daron Acemoglu, 2001.
"Directed Technical Change,"
NBER Working Papers
8287, National Bureau of Economic Research, Inc.
- Lazear, Edward, 2003. "Entrepreneurship," IZA Discussion Papers 760, Institute for the Study of Labor (IZA).
- Oded Galor & Omer Moav, 2000.
"Ability-Biased Technological Transition, Wage Inequality, And Economic Growth,"
The Quarterly Journal of Economics,
MIT Press, vol. 115(2), pages 469-497, May.
- Oded Galor & Omer Moav, 1998. "Ability Biased Technological Transition, Wage Inequality, and Economic Growth," Working Papers 98-14, Brown University, Department of Economics.
- Young, Alwyn, 1993. "Invention and Bounded Learning by Doing," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 443-72, June.
- Kevin J. Stiroh, 2001.
"Information technology and the U.S. productivity revival: what do the industry data say?,"
115, Federal Reserve Bank of New York.
- Kevin J. Stiroh, 2002. "Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?," American Economic Review, American Economic Association, vol. 92(5), pages 1559-1576, December.
- Gould, Eric D & Moav, Omer & Weinberg, Bruce A, 2001. " Precautionary Demand for Education, Inequality, and Technological Progress," Journal of Economic Growth, Springer, vol. 6(4), pages 285-315, December.
- Christopher Gust & Jaime Marquez, 2000. "Productivity developments abroad," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 665-681.
- Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9408. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.