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The augmented Solow model with Mincerian schooling and externalities

Listed author(s):
  • Carstensen, Kai
  • Gundlach, Erich
  • Hartmann, Susanne

We combine the augmented Solow model with the Mincer equation to derive a specification that identifies an education externality within a production function framework. The previous empirical literature has not reached a consensus about the size of the education externality, which is given by the difference between the microeconomic and the macroeconomic return to education. Relative to our benchmark value that is based on a parameterization of the derived specification, we find that the estimated education externality is too large when the empirical model is not properly restricted, and appears to be absent when all control variables of the empirical model are properly accounted for. We note that the absence of an education externality would be inconsistent with observed levels education subsidies.

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File URL: https://www.econstor.eu/bitstream/10419/4241/1/KWP_1408.pdf
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Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Working Papers with number 1408.

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Date of creation: 2008
Handle: RePEc:zbw:ifwkwp:1408
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  1. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters,in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  2. George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, vol. 12(2), pages 111-134.
  3. Daniel Cohen & Marcelo Soto, 2007. "Growth and human capital: good data, good results," Journal of Economic Growth, Springer, vol. 12(1), pages 51-76, March.
  4. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  5. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
  6. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, November.
  7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  8. Daniel Kaufmann & Aart Kraay & Massimo Mastruzzi, 2004. "Governance Matters III: Governance Indicators for 1996, 1998, 2000, and 2002," World Bank Economic Review, World Bank Group, vol. 18(2), pages 253-287.
  9. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
  10. repec:wbk:wbpubs:12425 is not listed on IDEAS
  11. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  12. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
  13. E. Gundlach & D. Rudman & L. Wossmann, 2002. "Second thoughts on development accounting," Applied Economics, Taylor & Francis Journals, vol. 34(11), pages 1359-1369.
  14. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 1-41.
  15. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
  16. O. Ashenfelter & D. Card (ed.), 1999. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 3, number 3.
  17. Jerik Hanushek & Dennis Kimko, 2006. "Schooling, Labor-force Quality, and the Growth of Nations," Educational Studies, Higher School of Economics, issue 1, pages 154-193.
  18. World Bank, 2005. "World Development Indicators 2005," World Bank Publications, The World Bank, number 12426, December.
  19. John W. McArthur & Jeffrey D. Sachs, 2001. "Institutions and Geography: Comment on Acemoglu, Johnson and Robinson (2000)," NBER Working Papers 8114, National Bureau of Economic Research, Inc.
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