Investment in education: some lessons from the international evidence for the Baltic states

The international empirical evidence on the economics of education reveals one central insight and two puzzles, which are all relevant for the case of the Baltic States. The central insight is that social rates of return to education tend to be higher than the social opportunity costs of capital, except for the case of higher education. Based on this microeconomic evidence, the case for public investment in education is well founded, especially at the primary and the secondary levels. The first puzzle is that at the macroeconomic level, the presumed positive link between increases in educational attainment and income growth is difficult to detect. One reason is that a high rate of absorption of well-educated workers by the government sector, typical for many developing countries, is likely to reduce the long-run growth rate. The second puzzle is that there is no clear link between higher spending on educational inputs and higher educational output in the form of improved performance of pupils. As it seems, higher spending on education is not sufficient to improve performance as long as inefficiencies in the schooling system remain. For the Baltic States, three basic lessons emerge from the international evidence: First, public investment in higher education does not show up as a top priority from a social point of view; second, the macroeconomic return to education could turn out to be low if better educated workers predominantly end up in the relatively large government sectors typical for the Baltic States. Third, the productivity of schooling could probably be improved, for instance by a different allocation of resources within the education sector. Most likely, such an outcome would require a fundamental reform of the schooling system itself, not only in the Baltic States. --

Accounting for the stock of human capital : selected evidence and potential implications.

Humankapital; Bildungsökonomik; Wirtschaftswachstum; Entwicklung; Welt;

Human capital and economic development: a macroeconomic assessment

Despite abundant microeconomic level evidence, the role of human capital in economic development has not been well documented at the macroeconomic level. Up to now, many empirical macro studies lack a consistent theoretical foundation. In addition, the wide range of published results seems to result from measurement problems due to a very narrow concept of human capital focusing on formal education. Future empirical research should take into account other important determinants of human capital such as the quality of education, the experience of the workforce, and the health status and the nutritional status of the population.

Regional convergence of output per worker in China : a neoclassical interpretation.

Regional output per worker has converged across Chinese provinces in 1979- 1989. The estimated rate of convergence is 2.2 percent. This rate of convergence can be explained by neoclassical growth model conditional on assumptions about factor mobility and production elasticities. My empirical results show that capital mobility has been high across Chinese provinces and that the production elasticity of human capital is about twice as high as the production elasticity of physical capital. With less interprovincial capital flows as the result of an expected increase in fiscal decentralization, the rate of convergence of regional output per worker is likely to decline.Arbeitsproduktivität; Interregionale Kapitalmobilität; Humankapital; China;

Education and Economic Development: An Empirical Perspective

There is surprisingly little macroeconomic empirical research which would support a presumed link between education and development. I identify three major reasons why it remains difficult to estimate the economic relevance of education as a determinant of growth and development. First, most empirical research has ignored some of the crucial productivity aspects of education as proposed by new growth models. Second, measuring the contribution of education to economic development has largely ignored international differences in rates of return and the quality of education. Third, the allocation of resources within the education sector usually does not follow considerations of efficiency, which implies that additional spending on education cannot be expected to produce substantial output effects.

The European single market: bad news for developing countries?

Developing Countries have been particularly worried by the single-market-program since the EC absorbs more than a third of their total exports. At present, fears of a Fortress Europe and negative net trade effects for DCs appear to be unfounded, however. DCs have proven to be competitive in a number of labour and capital intensive industries in the past; and it is rather unplausible that European suppliers will gain a competitive edge in these industries as a result of the single market. With the exception of agricultural economies specialized on specific products, the net welfare effect of EC-1992 will, therefore, be either positive or at worst zero for most DCs.

Testing growth theories: Time series evidence

Recent time series studies reject the hypothesis of catching up in terms of international per capita incomes as derived from the traditional neoclassical growth model. In turn, they seem to support new theories of economic growth which are capable of explaining persistent international differences in per capita incomes. In this paper I show that this finding is derived under a very restrictive econometric framework. Using a more flexible specification that allows for conditional convergence in per capita incomes and a gradual adjustment over time I derive results that are more favorable for the traditional growth model.development of per capita incomes,cointegration analysis, dynamic specification

The Solow Model in the Empirics of Cross-Country Growth

Translated to a cross-country context, the Solow model (Solow 1956) would predict that international differences in steady state output per person are due to international differences in technology such that the capital output ratio is constant for international differences in steady state capital intensities. Most of the cross-country growth literature that refers to the Solow model has employed a specification where steady state differences in output per person are due to international differences in the capital output ratio for a constant level of technology. My empirical results show that the cross-country data can also be summarized by an alternative empirical specification of the Solow model that uses a measure of institutional technology as an explanatory variable and treats the capital output ratio as part of the regression constant. The steady state implications of the Solow model with regard to international technology differences also appear to matter for empirical studies of trade. In contrast to Hicks neutral technology differences, Harrod neutral technology differences may explain why countries have different factor intensities and end up in different cones of specialization.