How Large Are Human Capital Externalities
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Volume Title: NBER Macroeconomics Annual 2000, Volume 15 Volume Author/Editor: Ben S. Bernanke and Kenneth Rogoff, editors Volume Publisher: MIT PRess Volume ISBN: 0-262-02503-5 Volume URL: http://www.nber.org/books/bern01-1 Publication Date: January 2001
Chapter Title: How Large are Human-Capital Externalities? Evidence from Compulsory-Schooling Laws Chapter Author: Daron Acemoglu, Joshua Angrist Chapter URL: http://www.nber.org/chapters/c11054 Chapter pages in book: (p. 9 - 74)
and DaronAcemoglu Joshua Angrist
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
How
Human-Capital Externalities? Evidence from Compulsory Schooling Laws
Large
Are
1. Introduction
The effect of human capital on aggregate income is of central importance to both policymakers and economists. A tradition going back to Schultz (1967) and Nelson and Phelps (1966) views the human capital of the workforce as a crucial factor facilitating the adoption of new and more productive technologies (see Foster and Rosenzweig, 1996, for evidence). Similarly, many recent endogenous growth models emphasize the link between human capital and growth. For example, in Lucas's (1988) model, worker productivity depends on the aggregate skill level, whereas Romer (1990) suggests that societies with more skilled workers generate more ideas and grow faster. More generally, many economists believe that cross-country income disparities are due in large part to differences in human capital (e.g., Mankiw, Romer, and Weil, 1992). Figure 1 plots the logarithm of output per worker relative to the United States for 103 countries against average years of schooling in 1985. Consistent with this view, the figure shows a strong correlation between output per worker and schooling. In fact, the bivariate regression line plotted in Figure 1 has an R2 of 65%.1
We thank Alexis Leon, Chris Mazingo, and Xuanhui Ng for
Volume Title: NBER Macroeconomics Annual 2000, Volume 15 Volume Author/Editor: Ben S. Bernanke and Kenneth Rogoff, editors Volume Publisher: MIT PRess Volume ISBN: 0-262-02503-5 Volume URL: http://www.nber.org/books/bern01-1 Publication Date: January 2001
Chapter Title: How Large are Human-Capital Externalities? Evidence from Compulsory-Schooling Laws Chapter Author: Daron Acemoglu, Joshua Angrist Chapter URL: http://www.nber.org/chapters/c11054 Chapter pages in book: (p. 9 - 74)
and DaronAcemoglu Joshua Angrist
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
How
Human-Capital Externalities? Evidence from Compulsory Schooling Laws
Large
Are
1. Introduction
The effect of human capital on aggregate income is of central importance to both policymakers and economists. A tradition going back to Schultz (1967) and Nelson and Phelps (1966) views the human capital of the workforce as a crucial factor facilitating the adoption of new and more productive technologies (see Foster and Rosenzweig, 1996, for evidence). Similarly, many recent endogenous growth models emphasize the link between human capital and growth. For example, in Lucas's (1988) model, worker productivity depends on the aggregate skill level, whereas Romer (1990) suggests that societies with more skilled workers generate more ideas and grow faster. More generally, many economists believe that cross-country income disparities are due in large part to differences in human capital (e.g., Mankiw, Romer, and Weil, 1992). Figure 1 plots the logarithm of output per worker relative to the United States for 103 countries against average years of schooling in 1985. Consistent with this view, the figure shows a strong correlation between output per worker and schooling. In fact, the bivariate regression line plotted in Figure 1 has an R2 of 65%.1
We thank Alexis Leon, Chris Mazingo, and Xuanhui Ng for