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Measurement Error in Education and Growth Regressions

  • M. Portela
  • C.N. Teulings
  • R. Alessie

The perpetual inventory method used for the construction of education data per country leads to systematic measurement error. This paper analyses the effect of this measurement error on GDP regressions. There is a systematic difference in the education level between census data and observations constructed from enrolment data. We discuss a methodology for correcting the measurement error. The standard attenuation bias suggests that using these corrected data would lead to a higher coe.cient. Our regressions reveal the opposite. We discuss why the measurement error yields an overestimation. Our analysis contributes to an explanation of thedifference between regressions based on 5 and on 10 year first—differences.Keywords: growth, education, measurement error

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File URL: http://dspace.library.uu.nl/bitstream/handle/1874/309384/04_14.pdf
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Paper provided by Utrecht School of Economics in its series Working Papers with number 04-14.

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Date of creation: Apr 2004
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Handle: RePEc:use:tkiwps:0414
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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. Nehru, Vikram & Swanson, Eric & Dubey, Ashutosh, 1995. "A new database on human capital stock in developing and industrial countries: Sources, methodology, and results," Journal of Development Economics, Elsevier, vol. 46(2), pages 379-401, April.
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  7. Bond, Stephen Roy & Hoeffler, Anke & Temple, Jonathan, 2001. "GMM Estimation of Empirical Growth Models," CEPR Discussion Papers 3048, C.E.P.R. Discussion Papers.
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  10. Wößmann, Ludger, 2003. "Specifying human capital," Munich Reprints in Economics 19660, University of Munich, Department of Economics.
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  19. Mulligan, Casey B & Sala-i-Martin, Xavier, 2000. " Measuring Aggregate Human Capital," Journal of Economic Growth, Springer, vol. 5(3), pages 215-52, September.
  20. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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  25. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
  26. Holtz-Eakin, Douglas, 1988. "Testing for individual effects in autoregressive models," Journal of Econometrics, Elsevier, vol. 39(3), pages 297-307, November.
  27. Topel, Robert, 1999. "Labor markets and economic growth," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 44, pages 2943-2984 Elsevier.
  28. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
  29. 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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