1. Does Education Cause Economic Growth? E. Podrecca, G. Carmeci Joanna Rymaszewska Seidu Issah Development Economics Warsaw University 13 November 2007

2. 13-11-2007 Development Economics Warsaw University2 Steps Economic growth models Where is education? What is the connection between education and economic growth? Discussion

3. 13-11-2007 Development Economics Warsaw University3 Growth theories Solow Growth Model Exogenous approach Neoclassical/Endogenous Growth Model Endogenous approach

4. 13-11-2007 Development Economics Warsaw University4 Education fires up technological progress Ideas, knowledge and skills– ability to use more advanced capital goods R&D spillovers, FDIs, international trade Where is education?

5. 13-11-2007 Development Economics Warsaw University5 Education contd... Technological change accounts for differences in the rate of economic growth & income differences across countries Technological change; innovation and imitation requires human capital as an input Formal education is an important source of human capital

6. 13-11-2007 Development Economics Warsaw University6 Granger causality Which do you think came first? The question has baffled scientists through the ages.... be it chicken-egg-chicken-egg... Growth Educational stock Educational investment

7. 13-11-2007 Development Economics Warsaw University7 Growth and human capital... Human capital stimulates productivity growth directly or indirectly...growth Investment Human capital as a vehicle for technical progress...levels Quality of human capital

8. 13-11-2007 Development Economics Warsaw University8 Capitals and growth Physical capital investment Investment in education G-cause Physical capital formation Educational levels (stocks) Physical capital + Human capital = Growth There is no Granger causality in both ways!

9. 13-11-2007 Development Economics Warsaw University9 The model.. VARiations Dataset: 86 DCs and LDCs GMMvar 1st, 2nd ord order autocorrelation 3– period-lag instrumental variable Ommited variable problem

10. 13-11-2007 Development Economics Warsaw University10 Discussion Education  Human Capital TFP Quality of eductional system Work experience and on the job training Health of the labour force EFA – Education for All:2015’ UNESCO

11. 13-11-2007 Development Economics Warsaw University11 Under what conditions does education boost economic growth? Conducive environment Teachers – students relationships Infrastructure Relevance Does education at all levels cause growth? Discussion contd.

12. 13-11-2007 Development Economics Warsaw University12 Further readings... Marta Simões, (2006); How does education affect economic growth? An empirical investigation. GEMF – Grupo de Estudos Monetários e Financeiros Faculdade de Economia da Universidade de Coimbra; Av. Dias da Silva 165. Charles I. Jones, (2002); Introduction to Economic Growth. 2nd Edition.

13. 13-11-2007 Development Economics Warsaw University13 Education is harder to steal (and therefore also to tax) than physical wealth... "If a man empties his purse into his head, no one can take it from him.„ ~Brian’s Education Blog Thank you