Catch me if you learn: Development-specific Education and Economic Growth

This paper presents a theoretical and empirical investigation of the relationship between human capital composition and economic growth. From the theoretical point of view, we generalize Vandenbussche et al. (2006) by allowing for non-constant returns to scale in imitation and innovation activities and we find that - unlike the previous work and for a wide range of parameters’ values - the impact of skilled workers on growth increases at lower stages of development. As for empirical evidence, we estimate Vandenbussche et al. (2006) the size using a 85 countries 1960-2000 panel with developed and developing countries using System GMM technique to address the problem of endogeneity. The analysis supports the model predictions in providing robust evidence of an increasing impact of tertiary education as the economy moves farther away from the frontier. Results are robust to different proxies of human capital and different specifications.