Working Paper: CEPR ID: DP14150
Authors: Ewout Frankema; Marlous van Waijenburg
Abstract: While human capital has gained prominence in new vintages of growth theory, economists have struggled to find the positive externalities of mass education in developing economies. We shed new light on the economic significance of the global ‘schooling revolution’ by looking at a different indicator of human capital accumulation – the relative price of skilled labor –, and placing it in a long-term global perspective. Based on a new wage dataset we constructed for various blue- and white-collar occupations in 50 African and Asian countries between 1870-2010, we reveal that skill-premiums have fallen dramatically everywhere in the course of the 20th century, and that they have now converged with levels that dominated in the West already for centuries. While such a ‘great convergence’ in skill-premiums is not a sufficient condition for Schumpeterian growth by itself, the growing availability of affordable skills is a necessary condition. Our findings, therefore, shed a more optimistic light on the long-term economic gains of mass education in the global South than standard growth regressions have hitherto done.
Keywords: Africa; Asia; Skill Premium; Mass Education; History
JEL Codes: J24; J31; N30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| relative price of skilled labor (J24) | skill premiums (J31) |
| mass education (I20) | skill premiums (J31) |
| mass education (I20) | economic growth (O49) |
| educational attainment (I21) | relative price of skilled labor (J24) |
| historical context of labor supply and demand + mass education (J20) | convergence of skill premiums (F16) |