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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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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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  19. 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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