Working Paper: CEPR ID: DP2466
Authors: Angel de la Fuente; Rafael Domenech
Abstract: We construct a revised version of the Barro and Lee (1996) data set for a sample of OECD countries using previously unexploited sources and following a heuristic approach to obtain plausible time profiles for attainment levels by removing sharp breaks in the data that seem to reflect changes in classification criteria. It is then shown that these revised data perform much better than the Barro and Lee (1996) or Nehru et al (1995) series in a number of growth specifications. We interpret these results as an indication that poor data quality may be behind counterintuitive findings in the recent literature on the (lack of) relationship between educational investment and growth. Using our preferred empirical specification, we also show that the contribution of TFP to cross-country productivity differentials is substantial and that its relative importance to differences in factor stocks increases over time.
Keywords: human capital; growth
JEL Codes: I20; O30; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| poor data quality (L15) | misleading conclusions about the relationship between educational investment and economic growth (I26) |
| revised data set (Y10) | better performance in growth regressions compared to Barro and Lee (1996) and Nehru et al. (1995) (C51) |
| revised data (Y10) | larger and more significant coefficient for human capital in various growth specifications (J24) |
| previous data sets (Y10) | underestimated the importance of human capital (J24) |
| elasticity of output with respect to human capital (J24) | productivity differentials attributed to differences in educational levels (J24) |
| better data quality (L15) | clearer and more conclusive results regarding the role of human capital in economic growth (J24) |
| revised data set (Y10) | positive and significant coefficients for human capital (J24) |
| original data (Y10) | statistically insignificant or negative coefficients for human capital (J24) |