The Importance of Education Quality for Growth and Development

34 Pages Posted: 5 Jun 2014 Last revised: 3 Oct 2015

See all articles by Eddie Gerba

Eddie Gerba

Banco de España; London School of Economics & Political Science (LSE); CES Ifo Institute; European Central Bank

Emmanuel V. Pikoulakis

Hull University Business School (HUBS)

Date Written: October 1, 2015

Abstract

In this paper we present a model of optimizing behavior in a two-sector, centrally planned, economy that faces a given interest rate and that is capable of generating sustainable growth. By allowing the model economy to benefit from innovations at the technology frontier through a simple process of technological transfers, we are able to show that education quality not only speeds up the process of technology diffusion but it also helps account for 45-53 per cent of differences in labor productivity. As we argue, failure to control for the gap in technology levels between the leader and the follower economies severely biases downwards the semi-elasticity on educational attainment and it severely biases upwards the share of earnings from capital.

Keywords: Human capital, education quality, endogenous growth, technological frontier

JEL Classification: O15, O41, O47

Suggested Citation

Gerba, Eddie and Pikoulakis, Emmanuel V., The Importance of Education Quality for Growth and Development (October 1, 2015). Available at SSRN: https://ssrn.com/abstract=2445882 or http://dx.doi.org/10.2139/ssrn.2445882

Eddie Gerba (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain
(+34)917088132 (Phone)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

CES Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Emmanuel V. Pikoulakis

Hull University Business School (HUBS) ( email )

Hull, HU6 7RX
United Kingdom

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