Were Mankiw, Romer, and Weil Right? A Reconciliation of the Micro and Macro Effects of Schooling on Income

Breton, Theodore R.

doi:10.1017/s1365100511000824

Cited by 40 publications

(23 citation statements)

References 40 publications

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“…Additionally, Bretton (2013) confirms that education has large external effects on national income. Substantive work using twins data by Ashenfelter and Krueger (1994), Miller et al (1995), Ashenfelter and Rouse (1998), Rouse (1999) and Berhrman and Rosenzweig, (1999) further examines the nature versus nuture debate and show that twins in better schools achieve higher test scores and later more employment success.…”

Section: Education Leads To Higher Pay and Productivitymentioning

confidence: 61%

The Economic Gains to Colorado of Amendment 66

Strauss

2013

SSRN Journal

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Section: Education Leads To Higher Pay and Productivitymentioning

confidence: 61%

The Economic Gains to Colorado of Amendment 66

Strauss

2013

SSRN Journal

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“…Other empirical studies also provide consistent results. Cohen and Soto [2007] and Breton [2013a] estimate exogenous growth models, and they both present evidence that increases in physical capital and in schooling attainment raise national income in this model. Jones [1995] and Liu [2005] test the consistency of historic changes in physical and human capital with the predictions of the endogenous growth model, and both studies reject the validity of this model.…”

mentioning

confidence: 86%

“…Similarly, an increase in the number of computers makes skilled workers more productive. Solow model when the level of schooling increases [Breton, 2013a]. An increase in schooling increases the nation's human capital, which then raises output both directly (the solid line) and via two indirect effects on the productivity of physical capital and (unschooled) labor, the other two factors of production (the dotted lines).…”

Section: Figure 2 Marginal Product Of Human Capital Across Countries mentioning

confidence: 99%

“…Source: Calculated from Breton [2013aBreton [ , 2013bBreton [ , and 2013c An analysis of the relative size of the components of the marginal product reveals that in the most educated countries, the total effect of schooling on national income is about 10% larger than the direct effect on workers' salaries. In countries with average human capital of about $20,000/adult, e.g., Colombia, the total effect of schooling is about 70% larger than the direct effect.…”

Section: Figure 5 Marginal Real Rate Of Return On Investment In Schoomentioning

confidence: 99%

“…In these estimates researchers assume that an incremental year of schooling raises national income by the same percentage, regardless of the initial average level of schooling. They make this assumption because this log-linear (Mincerian) relationship between income and years of schooling provides a good fit with the national income data [Breton, 2013a]. Table 1 presents the implied estimates of the effect of an additional year of schooling on income/adult or on income/capita from recent articles in peer-reviewed journals.…”

Section: Market Return External Returnmentioning

confidence: 99%

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Schooling and Economic Growth: What Have We Learned?

Breton

2014

SSRN Journal

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This paper explains why different studies present widely-varying estimates of the effect of increased schooling on national income. It shows that when correctly-interpreted, these studies support the hypothesis that a one-year increase in average schooling attainment raises national income directly by about 10% and indirectly by about 19%. The increases in national income [2008, 2012a, and 2012b] present statistical results showing that differences in students' scores on international tests of science and mathematics explain three times the variation in GDP/capita growth rates explained by differences in adults' average schooling attainment. They also show that when the effect of average test scores and average attainment are examined together, differences in test scores explain most of the variation in growth rates and differences in schooling do not explain any of this variation. They conclude that more schooling does not reliably raise students' cognitive skills and that increases in cognitive skills at ages 9 to 15, not increases in schooling, cause economic growth [Hanushek and Woessmann, 2008].But other studies of the effect of schooling on national income come to completely different conclusions. Gennaioli, La Porta, Lopez-de-Silanes, and Shleifer [2013] examine the relationship between average income/adult and average schooling attainment in 1569 world regions that account for 97 percent of world GDP. They find that differences in schooling can explain 58 percent of the differences in income/capita across these regions, far more than any other single factor. When they estimate the effect of multiple factors on income, they find that the level of schooling is by far the most important factor. Each additional year of schooling is associated with a 26% increase in income/capita. This enormous inconsistency in the estimated effect of increased schooling on national income across studies is not a new phenomenon. Krueger and Lindahl [2001] investigated the causes of this inconsistency in their comprehensive review of the earlier empirical literature. They found that the estimated effect of schooling depends on the structure of the income model used in each analysis. They showed that the estimates are very different if the physical capital stock is included or excluded from the model, or if the effect of changes in schooling are examined prior to or during the growth period.They also found that the estimated effect of schooling is minimal if it is examined using poorly-measured schooling data over short periods, or if the mathematical relationship between the measures of income and schooling is not correctly specified.The more recent literature continues to provide widely-varying estimates of the effect of additional schooling on national income. But I show in this article that these differences actually are consistent because they are entirely explained by differences in the structure of the growth model used to estimate the effect of schooling in the different studies. As a consequence, there ...

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An Application of Augmented Solow Model with Upper Limit of Capital

Liang

2022

Applied Economics and Policy Studies

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Were Mankiw, Romer, and Weil Right? A Reconciliation of the Micro and Macro Effects of Schooling on Income

Cited by 40 publications

References 40 publications

The Economic Gains to Colorado of Amendment 66

The Economic Gains to Colorado of Amendment 66

Schooling and Economic Growth: What Have We Learned?

An Application of Augmented Solow Model with Upper Limit of Capital

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