Knowledge Capital and Aggregate Income Differences: Development Accounting for U.S. States

77 Pages Posted: 22 Jun 2015

See all articles by Eric A. Hanushek

Eric A. Hanushek

Stanford University - Hoover Institution on War, Revolution and Peace; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Jens Ruhose

Leibniz Universit├Ąt Hannover - Faculty of Economics and Management

Ludger Woessmann

Ifo Institute for Economic Research; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); University of Munich - Ifo Institute for Economic Research

Multiple version iconThere are 3 versions of this paper

Date Written: June 2015

Abstract

Improvement in human capital is often presumed important for state economic development, but little research links better education to state incomes. We develop detailed measures of worker skills in each state that incorporate cognitive skills from state- and country-of-origin achievement tests. These new measures of knowledge capital permit development accounting analyses calibrated with standard production parameters. Differences in knowledge capital account for 20-30 percent of the state variation in per-capita GDP, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses. These estimates support school improvement as a strategy for state economic development.

Suggested Citation

Hanushek, Eric A. and Ruhose, Jens and Woessmann, Ludger, Knowledge Capital and Aggregate Income Differences: Development Accounting for U.S. States (June 2015). NBER Working Paper No. w21295. Available at SSRN: https://ssrn.com/abstract=2621349

Eric A. Hanushek (Contact Author)

Stanford University - Hoover Institution on War, Revolution and Peace ( email )

Stanford, CA 94305-6010
United States
650-736-0942 (Phone)
650-723-1687 (Fax)

National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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Jens Ruhose

Leibniz Universit├Ąt Hannover - Faculty of Economics and Management ( email )

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Germany

Ludger Woessmann

Ifo Institute for Economic Research ( email )

Poschingerstr. 5
Munich
Germany
++49 89 9224 1699 (Phone)
++49 89 9224 1460 (Fax)

HOME PAGE: http://www.cesifo.de/link/woessmann_l.htm

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

University of Munich - Ifo Institute for Economic Research

Schackstr. 4
Munich, 80539
Germany

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