Working Paper: CEPR ID: DP8683
Authors: Francesco Caselli; Antonio Ciccone
Abstract: How much would output increase if underdeveloped economies were to increase their levels of schooling? We contribute to the development accounting literature by describing a non-parametric upper bound on the increase in output that can be generated by more schooling. The advantage of our approach is that the upper bound is valid for any number of schooling levels with arbitrary patterns of substitution/complementarity. Another advantage is that the upper bound is robust to certain forms of endogenous technology response to changes in schooling. We also quantify the upper bound for all economies with the necessary data, compare our results with the standard development accounting approach, and provide an update on the results using the standard approach for a large sample of countries.
Keywords: development accounting; imperfect substitution; schooling
JEL Codes: I25; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increasing schooling levels in underdeveloped economies (I25) | significant increases in output (E23) |
| marginal productivity of unschooled workers increases when more schooled workers are introduced into the labor force (J24) | overall increase in output (E23) |
| perfect substitutability among different schooling levels (I21) | derived upper bound on output increases (C69) |