Does Education Cause Economic Growth?

E. Podrecca, G. Carmeci

Joanna Rymaszewska

Seidu Issah

Development Economics

Warsaw University13 November 2007

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Steps Economic growth models

Where is education?

What is the connection between education and economic growth?

Discussion

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Growth theoriesSolow Growth Model

Exogenous approach

Neoclassical/Endogenous Growth Model

Endogenous approach

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Education fires up technological progress

Ideas, knowledge and skills– ability to use more advanced capital goodsR&D spillovers, FDIs, international trade

Where is education?

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Education contd...Technological change accounts for differences in the rate of economic growth & income differences across countries Technological change; innovation and imitation requires human capital as an inputFormal education is an important source of human capital

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Granger causalityWhich do you think came first? The question has baffled scientists through the ages.

... be it chicken-egg-chicken-egg ...

Growth

Educational stock

Educational

investment

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Growth and human capital...

Human capital stimulates productivity growth directly or indirectly

...growthInvestmentHuman capital as a vehicle for technical progress

...levelsQuality of human capital

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Capitals and growth

Physical capital

investment

Investment in

educationG-cause

Physical capital

formation

Educational levels (stocks)

Physical capital + Human capital =

Growth

There is no Granger causality in both ways!

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The model.. VARiationsDataset: 86 DCs and LDCs

GMMvar1st, 2nd ord order autocorrelation3– period-lag instrumental variable

Ommited variable problem

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DiscussionEducation Human CapitalTFP

Quality of eductional systemWork experience and on the job trainingHealth of the labour force

EFA – Education for All:2015’ UNESCO

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Under what conditions does education boost economic growth?

Conducive environmentTeachers – students relationshipsInfrastructureRelevance

Does education at all levels cause growth?

Discussion contd.

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Further readings...Marta Simões, (2006); How does education affect economic growth? An empirical investigation. GEMF – Grupo de Estudos Monetários e Financeiros Faculdade de Economia da Universidade de Coimbra; Av. Dias da Silva 165.

Charles I. Jones, (2002); Introduction to Economic Growth. 2nd Edition.

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Education is harder to steal (and therefore also to tax) than physical wealth...

"If a man empties his purse into his head, no one can take it from him.„

~Brian’s Education Blog

Thank you