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Education for Growth in Sweden and the World

  • Alan Krueger

    (Princeton University and NBER)

  • Mikael Lindahl

    (Stockholm University)

This paper tries to reconcile evidence on the effect of schooling on income and on GDP growth from the microeconometric and empirical macro growth literatures. Much microeconometric evidence suggests that education is an important causal determinant of income for individuals within countries as diverse as Sweden and the United States. At a national level, however, recent studies have found that increases in educational attainment are unrelated to economic growth. This ï¬ nding is shown to be a spurious result of the extremely high rate of measurement error in ï¬ rst-differenced cross-country education data. Aï¬ er accounting for measurement error, the effect of changes in educational attainment on income growth in cross-country data is at least as great as microeconometric estimates of the rate of return to years of schooling. We also investigate another ï¬ nding of the macro growth literature -- that economic growth depends positively on the initial stock of human capital. We ï¬ nd that the effect of the initial level of education on growth is sensitive to the econometric assumptions that are imposed on the data (e.g., constant-coefficient assumption), as well as to the other covariates included in the model. Perhaps most importantly, we ï¬ nd that the initial level of education does not appear to have a signiï¬ cant effect on economic growth among OECD countries. The conclusion comments on policy implications for Sweden based on the human capital literature.

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Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 790.

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Date of creation: Dec 1998
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Handle: RePEc:pri:indrel:411
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