The role of education quality for economic growth
TL;DR: The role of education in promoting economic well-being, focusing on the role of educational quality, has become controversial because expansion of school attainment has not guaranteed improved economic conditions as mentioned in this paper.
Abstract: The role of improved schooling, a central part of most development strategies, has become controversial because expansion of school attainment has not guaranteed improved economic conditions. This paper reviews the role of education in promoting economic well-being, focusing on the role of educational quality. It concludes that there is strong evidence that the cognitive skills of the population-rather than mere school attainment-are powerfully related to individual earnings, to the distribution of income, and to economic growth. New empirical results show the importance of both minimal and high-level skills, the complementarity of skills and the quality of economic institutions, and the robustness of the relationship between skills and growth. International comparisons incorporating expanded data on cognitive skills reveal much larger skill deficits in developing countries than generally derived from just school enrollment and attainment. The magnitude of change needed makes it clear that closing the economic gap with industrial countries will require major structural changes in schooling institutions.
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19 Dec 2008TL;DR: The economics of growth as mentioned in this paper is a comprehensive, rigorous, and up-to-date introduction to growth economics that presents all the major growth paradigms and shows how they can be used to analyze the growth process and growth policy design.
Abstract: A comprehensive, rigorous, and up-to-date introduction to growth economics that presents all the major growth paradigms and shows how they can be used to analyze the growth process and growth policy design.This comprehensive introduction to economic growth presents the main facts and puzzles about growth, proposes simple methods and models needed to explain these facts, acquaints the reader with the most recent theoretical and empirical developments, and provides tools with which to analyze policy design. The treatment of growth theory is fully accessible to students with a background no more advanced than elementary calculus and probability theory; the reader need not master all the subtleties of dynamic programming and stochastic processes to learn what is essential about such issues as cross-country convergence, the effects of financial development on growth, and the consequences of globalization. The book, which grew out of courses taught by the authors at Harvard and Brown universities, can be used both by advanced undergraduate and graduate students, and as a reference for professional economists in government or international financial organizations.The Economics of Growth first presents the main growth paradigms: the neoclassical model, the AK model, Romer's product variety model, and the Schumpeterian model. The text then builds on the main paradigms to shed light on the dynamic process of growth and development, discussing such topics as club convergence, directed technical change, the transition from Malthusian stagnation to sustained growth, general purpose technologies, and the recent debate over institutions versus human capital as the primary factor in cross-country income differences. Finally, the book focuses on growth policies?analyzing the effects of liberalizing market competition and entry, education policy, trade liberalization, environmental and resource constraints, and stabilization policy?and the methodology of growth policy design. All chapters include literature reviews and problem sets. An appendix covers basic concepts of econometrics.
938 citations
Journal Article•
666 citations
01 Dec 1993
623 citations
Journal Article•
TL;DR: The Elusive Quest for Growth: Economists' Adventures and misadventures in the Tropics by William Easterly as discussed by the authors is an important, controversial, unusual, and accessible book that is destined to be an influential and enduring contribution to the development economics literature.
Abstract: The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics. By William Easterly. Cambridge, MA: The MIT Press, 2001. Pp. xiii + 342. This is an important, controversial, unusual, and accessible book. It has already received a lot of public attention, and it is destined to be an influential and enduring contribution to the development economics literature. The book is important because there is arguably no topic more critical than understanding why so many of the world's poor remain poor, and why a fortunate few countries have "grown out of poverty" in the post-war period. William Easterly has worked for many years in the world's preeminent international development agency (like it or not, that is what the World Bank is). He has been one of the leading intellectual thinkers in the bank, and has published widely in the top economic journals. The book is controversial because it has hit the headlines, with major write-ups in the world's most influential newspapers, including the New York Times and the International Herald Tribune. It is written by a World Bank insider who is critical of donors' development efforts, moreover coming at a time when the bank itself is in a state of flux bordering at times on turmoil. The volume is accessible because it exhibits an all-too-rare capacity among economists to write with a wider audience in mind. The author demonstrates an uncanny knack in distilling complex theory and analytics for a general audience. Finally, it is unusual for features noted below, especially its structure and writing style. If the book has two key messages, they are that "people respond to incentives" and that "growth is good for the poor". These might appear awfully obvious to mainstream economists and to the general community in well-managed, fast-growing economies. But it is surprising how widely these messages have been ignored by governments in poor countries and by international development agencies. The book consists of fourteen chapters, all but the last followed by an "Intermezzo", and is organized into four sections. The first and last chapters and these Intermezzi portray the human dimensions of poverty in the Third World. The two substantive sections look at "Panaceas that Failed" and "People Respond to Incentives". The "panaceas" refer to theories and recipes for rapid growth, which in the author's view, have failed to live up to expectations. The first substantial chapter looks at the disappointing record of international development assistance. In aggregate, it is very difficult to discern a statistical relationship which demonstrates that aid has made a difference. Then Easterly switches to the micro, looking at Ghana, a country full of hope on the threshold of independence (and often likened to Malaysia), but whose per capita income is now little different from that of 1950. The author also attacks the "financing gap" literature, which became popular with the Harrod-Domar growth models, and later with the work of Rostow in the 1960s. This "gaps" literature had largely dropped out of academic discourse by 1980, but we are told here that it lived on in international agencies, and was employed to justify aid programmes. While the author's story in these two chapters is a largely negative one, it needs to be emphasized that in countries with sound economic policies -- that is, much of Southeast Asia until recently -- well-run aid programmes can make a difference. Perhaps more could have been made of this point. Continuing this demolition of an "inputs" approach to growth, Easterly revisits "Solow's Surprise: investment is not the key to growth". The proposition that investment alone is no guarantee of growth is, of course, widely accepted in the academic literature, but it, too, has apparently not percolated through some international financial institutions. There is also a useful, sceptical discussion in this chapter of the total factor productivity (TFP) literature, including a recounting of the astounding Young-Krugman allegation that Singapore recorded zero TFP growth for its first twenty years or so of independence. …
366 citations
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01 Jan 1990TL;DR: Douglass C. North as discussed by the authors developed an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time.
Abstract: Continuing his groundbreaking analysis of economic structures, Douglass North develops an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time. Institutions exist, he argues, due to the uncertainties involved in human interaction; they are the constraints devised to structure that interaction. Yet, institutions vary widely in their consequences for economic performance; some economies develop institutions that produce growth and development, while others develop institutions that produce stagnation. North first explores the nature of institutions and explains the role of transaction and production costs in their development. The second part of the book deals with institutional change. Institutions create the incentive structure in an economy, and organisations will be created to take advantage of the opportunities provided within a given institutional framework. North argues that the kinds of skills and knowledge fostered by the structure of an economy will shape the direction of change and gradually alter the institutional framework. He then explains how institutional development may lead to a path-dependent pattern of development. In the final part of the book, North explains the implications of this analysis for economic theory and economic history. He indicates how institutional analysis must be incorporated into neo-classical theory and explores the potential for the construction of a dynamic theory of long-term economic change. Douglass C. North is Director of the Center of Political Economy and Professor of Economics and History at Washington University in St. Louis. He is a past president of the Economic History Association and Western Economics Association and a Fellow, American Academy of Arts and Sciences. He has written over sixty articles for a variety of journals and is the author of The Rise of the Western World: A New Economic History (CUP, 1973, with R.P. Thomas) and Structure and Change in Economic History (Norton, 1981). Professor North is included in Great Economists Since Keynes edited by M. Blaug (CUP, 1988 paperback ed.)
27,080 citations
Posted Content•
TL;DR: In this article, the authors examine the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time.
Abstract: Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
26,011 citations
01 Jan 1988
Abstract: This paper considers the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development. Three models are considered and compared to evidence: a model emphasizing physical capital accumulation and technological change, a model emphasizing human capital accumulation through schooling, and a model emphasizing specialized human capital accumulation through learning-by-doing.
19,093 citations
TL;DR: In this article, the authors consider the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development, and compare three models and compared to evidence.
16,965 citations
TL;DR: The authors examined whether the Solow growth model is consistent with the international variation in the standard of living, and they showed that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data.
Abstract: This paper examines whether the Solow growth model is consistent with the international variation in the standard of living. It shows that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data. The paper also examines the implications of the Solow model for convergence in standards of living, that is, for whether poor countries tend to grow faster than rich countries. The evidence indicates that, holding population growth and capital accumulation constant, countries converge at about the rate the augmented Solow model predicts. This paper takes Robert Solow seriously. In his classic 1956 article Solow proposed that we begin the study of economic growth by assuming a standard neoclassical production function with decreasing returns to capital. Taking the rates of saving and population growth as exogenous, he showed that these two vari- ables determine the steady-state level of income per capita. Be- cause saving and population growth rates vary across countries, different countries reach different steady states. Solow's model gives simple testable predictions about how these variables influ- ence the steady-state level of income. The higher the rate of saving, the richer the country. The higher the rate of population growth, the poorer the country. This paper argues that the predictions of the Solow model are, to a first approximation, consistent with the evidence. Examining recently available data for a large set of countries, we find that saving and population growth affect income in the directions that Solow predicted. Moreover, more than half of the cross-country variation in income per capita can be explained by these two variables alone. Yet all is not right for the Solow model. Although the model correctly predicts the directions of the effects of saving and
14,402 citations