Launch of Guangdong Compulsory Education Project (News and Research 77)

Learning about Education Limited human capital investment is a common characteristic of low-income countries despite the fact that estimated returns to educational investment in low-income countries are generally higher than those in high-income countries. Empirical evidence suggests that income and credit constraints can only account for a part of this underinvestment. Recent experimental evidence shows that families’ misperceptions about the returns to education play a role in their low-investment levels. This paper builds a heterogeneous-agent model of human capital and growth that incorporates an adaptive learning mechanism to capture the way agents form perceptions about returns to education. We find natural conditions guaranteeing existence of stable equilibria. Along transition paths, agents’ misperceptions about returns to education depress realized returns, which serves to reenforce and perpetuate low human-capital investment. If human capital investments have both private and public returns, we find multiple stable equilibria, including those which are characterized by low investment and low returns…

Education as a Long-Term Investment: The Decisive Role of Age in the Education-Growth Relationship Using a dataset for a panel of 118 countries, this paper shows that changes in the level of education of national populations aged 45 to 64 are positively associated with economic growth. An increase of one percentage point in the share of individuals in this age group who attended secondary education is associated with a 1.2% increase in GDP per capita. In contrast, variation in the level of education in younger cohorts is not positively associated with economic growth. These results suggest that investment in education benefits society, but only in the long-term. Several possible explanations for this finding are discussed…

It’s Human Capital Again: The Centrality of Higher Education in Explaining GDP per Employee …higher education is the single crucial factor for explaining long-term GDP per-employee. According to our analysis the reform implemented by Asian Tigers, which implied a transition from primary and secondary education to an increased share of tertiary education among the working population, allowed these countries to reach the level that prevails in developed economies. In contrast, Latin American countries that did not pursue higher education reform, did not achieve sizable growth…

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