Education and Economic Development
Education and economic development
The analysis of education as an economic commodity has a long history. The seminal work of Becker (1962) and Schultz(1962) presented a formal model of education as an investment good that augmented the stock of human capital. Individuals made educational choices in the same way as any other investment decision all of which have the common characteristic that an investment cost paid now produces a flow of benefits through time whose present discounted value is to be compared with the present cost. Following from this, there was an outpouring of econometric studies attempting to measure the rate of return to education – the so called Mincerian approach – whilst controlling for a plethora of other variables that might reasonably be expected to influence earnings. Extensions of this basic Human Capital model to study training outcomes, educational subsidies and fee charges have been recently exploited. Within development and growth economics, the importance of education as an economic variable also has a distinguished history beginning with Lewis(1962). Questions regarding appropriate mix of skills, what type of education to be emphasised, the relationship between education and the capacity of the economy to absorb educated workers in productive employment have all been studied albeit outside the confines of a formal model. Recently, the resurgence of interest in endogenous growth – the so called New Growth Theory ( Barro(1991), Barro and Sala-i-Martin (1995),Lucas (1998) has given a huge impetus to the formal analysis of the potential role of education in economic growth.
However it must be emphasised that economic growth and economic development are not the same thing. Economic growth is one component albeit a very important one in the process of economic development. This important distinction is best illustrated by the creation (and widespread use) of the Human Development Index by UNDP. This index has acquired the status of
The analysis of education as an economic commodity has a long history. The seminal work of Becker (1962) and Schultz(1962) presented a formal model of education as an investment good that augmented the stock of human capital. Individuals made educational choices in the same way as any other investment decision all of which have the common characteristic that an investment cost paid now produces a flow of benefits through time whose present discounted value is to be compared with the present cost. Following from this, there was an outpouring of econometric studies attempting to measure the rate of return to education – the so called Mincerian approach – whilst controlling for a plethora of other variables that might reasonably be expected to influence earnings. Extensions of this basic Human Capital model to study training outcomes, educational subsidies and fee charges have been recently exploited. Within development and growth economics, the importance of education as an economic variable also has a distinguished history beginning with Lewis(1962). Questions regarding appropriate mix of skills, what type of education to be emphasised, the relationship between education and the capacity of the economy to absorb educated workers in productive employment have all been studied albeit outside the confines of a formal model. Recently, the resurgence of interest in endogenous growth – the so called New Growth Theory ( Barro(1991), Barro and Sala-i-Martin (1995),Lucas (1998) has given a huge impetus to the formal analysis of the potential role of education in economic growth.
However it must be emphasised that economic growth and economic development are not the same thing. Economic growth is one component albeit a very important one in the process of economic development. This important distinction is best illustrated by the creation (and widespread use) of the Human Development Index by UNDP. This index has acquired the status of