does education cause economic growth? e. podrecca, g. carmeci joanna rymaszewska seidu issah...

Does Education Cause Economic Growth?

E. Podrecca, G. Carmeci

Joanna Rymaszewska

Seidu Issah

Development Economics

Warsaw University13 November 2007

13-11-2007Development Economics

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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