EDUCATIONAL OUTCOMES IN OECD COUNTRIES
the process rediscovered the importance of growth. The analysis here particularly
concentrates on the role of human capital. Human capital has been a central focus of
much of the recent growth modeling, and it is a standard element of any empirical work.
The prior analytical work has nonetheless diverged in important ways. Economists
have developed a number of alternative models designed to highlight important
determinants of economic growth. These theoretical views about the determinants of
growth have gone in a variety of directions (see Box 1). Two aspects of theoretical
investigations stand out for the discussion here. First, each of the approaches suggests
somewhat different empirical specifications for any statistical modeling. Second, while
each of the approaches has some conceptual appeal, it has been difficult to test the
validity of the alternatives in an adequate manner. The restricted variation of
experiences across countries plus general data limitations have made it difficult to
distinguish among the competing models of growth - and such is the case here.
Box 1. Education in theories of economic growth
Theoretical models of economic growth have emphasized different mechanisms
through which education may affect economic growth. As a general summary, three
theoretical models have been applied to the modeling of economic growth, and each has
received support from the data. At the same time, it has been difficult to compare the
alternative models and to choose among them based on the economic growth data.
The most straightforward modeling follows a standard characterization of an aggregate
production function where the output of the macro economy is a direct function of the
capital and labor in the economy. The basic growth model of Solow (1957) began with
such a description and then added an element of technological change to get the
movement of the economy over time. The sources of this technological change,
although central to understanding growth, were not an integral part of the analysis.
Augmented neoclassical growth theories, developed by Mankiw, Romer, and Weil
(1992), extend this analysis to incorporate education, stressing the role of education as a
factor of production. Education can be accumulated, increasing the human capital of the
labor force and thus the steady-state level of aggregate income. The human capital
component of growth comes through accumulation of more education that implies the
economy moves from one steady-state level to another; once at the new level, education
exerts no further influence on growth. The common approach to estimating this model is
to relate changes in GDP per worker to changes in education (and capital).
A very different view comes from the “endogenous growth” literature that has
developed over the past two decades. In this work, a variety of researchers (importantly,
Lucas (1988), Romer (1990a), and Aghion and Howitt (1998)) stress the role of
education in increasing the innovative capacity of the economy through developing new
ideas and new technologies. These are called endogenous growth models because
technological change is determined by economic forces within the model. Under these