Does Education Cause Economic Growth

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Does Education Cause Economic Growth?

• E. Podrecca, G. Carmeci

Joanna Rymaszewska Seidu Issah Development
Economics Warsaw University 13 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 theories

• Solow Growth Model
• Exogenous approach
• Neoclassical/Endogenous Growth Model
• Endogenous approach

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Where is education?

• Education fires up technological progress
• Ideas, knowledge and skills ability to use more
  advanced capital goods
• RD spillovers,
• FDIs, international trade

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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 input
• Formal education is an important source of human
  capital

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Granger causality

• Which do you think came first? The question has
  baffled scientists through the ages.

Educational stock
Growth
Educational investment
... be it chicken-egg-chicken-egg ...
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Growth and human capital...

• Human capital stimulates productivity growth
  directly or indirectly
• ...growth
• Investment
• Human capital as a vehicle for technical progress
• ...levels
• Quality of human capital

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Capitals and growth
G-cause

• Physical capital Human
  capital

• There is no Granger causality in both ways!

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The model.. VARiations

• Dataset 86 DCs and LDCs
• GMMvar
• 1st, 2nd ord order autocorrelation
• 3 period-lag instrumental variable
• Ommited variable problem

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Discussion

• Education ? Human Capital
• TFP
• Quality of eductional system
• Work experience and on the job training
• Health of the labour force
• EFA Education for All2015 UNESCO

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Discussion contd.

• Under what conditions does education boost
  economic growth?
• Conducive environment
• Teachers students relationships
• Infrastructure
• Relevance
• Does education at all levels cause growth?

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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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Thank you

• 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.
• Brians Education Blog