Princeton University, Industrial Relations Section Working Paper No. 429
65 Pages Posted: 30 Apr 2000
Date Written: January 2000
This paper tries to reconcile evidence from the microeconometric and empirical macro growth literatures on the effect of schooling on income and GDP growth. Much microeconometric evidence suggests that education is an important causal determinant of income for individuals within countries. At a national level, however, recent studies have found that increases in educational attainment are unrelated to economic growth. This finding appears to be a spurious result of the extremely high rate of measurement error in first-differenced cross-country education data. After accounting for measurement error, the effect of changes in educational attainment on income growth in cross-country data is at least as great as microeconometric estimates of the rate of return to years of schooling. Another finding of the macro growth literature - that economic growth depends positively on the initial stock of human capital - is shown to result from imposing linearity and constant-coefficient assumptions on the estimates. These restrictions are often rejected by the data, and once either assumption is relaxed the initial level of education has little effect on economic growth for the average country.
JEL Classification: J24
Suggested Citation: Suggested Citation
Krueger, Alan B. and Lindahl, Mikael, Education for Growth: Why and For Whom? (January 2000). Princeton University, Industrial Relations Section Working Paper No. 429. Available at SSRN: https://ssrn.com/abstract=223589 or http://dx.doi.org/10.2139/ssrn.223589