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Micro Evidence on Human Capital as the Engine of Growth

  • Trostel, P.A.
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    This study examines a crucial assumption in much of the recent work on endogenous growth, namely, constant returns to scale in the production of human capital. A simple model is constructed to show that the returns to scale in human capital production can be inferred from the relationship between the wage rate and years of schooling. A large international micro dataset is used to estimate this relationship. The empirical evidence is decisive. There are decreasing returns to scale in human capital production; that is, the micro-level evidence is not supportive of endogenous growth driven by human capital accumulation.

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    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp555.pdf
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    Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 555.

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    Length: 20 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:wrk:warwec:555
    Contact details of provider: Postal: CV4 7AL COVENTRY
    Phone: +44 (0) 2476 523202
    Fax: +44 (0) 2476 523032
    Web page: http://www2.warwick.ac.uk/fac/soc/economics/

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    1. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
    2. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April.
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    6. King, R.G. & Rebelo, S., 1988. "Public Policy And Economic Growth: Developing Neoclassical Implications," RCER Working Papers 225, University of Rochester - Center for Economic Research (RCER).
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    8. Jess Benhabib & Boyan Jovanovic, 1989. "Externalities and Growth Accounting," NBER Working Papers 3190, National Bureau of Economic Research, Inc.
    9. Blinder, Alan S & Weiss, Yoram, 1976. "Human Capital and Labor Supply: A Synthesis," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 449-72, June.
    10. Rosen, Sherwin, 1976. "A Theory of Life Earnings," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S45-67, August.
    11. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc.
    12. Howard Pack, 1994. "Endogenous Growth Theory: Intellectual Appeal and Empirical Shortcomings," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 55-72, Winter.
    13. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S11-44, August.
    14. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
    15. Groot, Wim & Oosterbeek, Hessel, 1994. "Earnings Effects of Different Components of Schooling: Human Capital versus Screening," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 317-21, May.
    16. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August.
    17. Saint-Paul, Gilles, 1996. "Unemployment and increasing private returns to human capital," Journal of Public Economics, Elsevier, vol. 61(1), pages 1-20, July.
    18. Colm Harmon & Ian Walker, 1997. "The Marginal and Average Returns to Schooling," Keele Department of Economics Discussion Papers (1995-2001) 97/07, Department of Economics, Keele University.
    19. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
    20. David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
    21. Mulligan, C.B. & Sala-i-Martin, X., 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," Papers 651, Yale - Economic Growth Center.
    22. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
    23. Wyckoff, James H., 1984. "The nonexcludable publicness of primary and secondary public education," Journal of Public Economics, Elsevier, vol. 24(3), pages 331-351, August.
    24. Romer, Paul M., 1990. "Human capital and growth: Theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 251-286, January.
    25. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    26. Levine, Ross & Zervos, Sara J, 1993. "What We Have Learned about Policy and Growth from Cross-Country Regressions?," American Economic Review, American Economic Association, vol. 83(2), pages 426-30, May.
    27. James Heckman & Anne Layne-Farrar & Petra Todd, 1995. "The Schooling Quality-Earnings Relationship: Using Economic Theory to Interpret Functional Forms Consistent with the Evidence," NBER Working Papers 5288, National Bureau of Economic Research, Inc.
    28. 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.
    29. Jaeger, David A & Page, Marianne E, 1996. "Degrees Matter: New Evidence on Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 733-40, November.
    30. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
    31. Andrew Weiss, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 133-154, Fall.
    32. Hungerford, Thomas & Solon, Gary, 1987. "Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 175-77, February.
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