New Estimates and Projections

Several years ago the authors published an article reporting the educational composisiton of the labor force around the world based mostly on the latest population censuses. This report represents an update of the original. The tables and graphs included in this report expand or update the old data with new information on 34 countries. The reader is warned however, that in spite of the authors' best efforts, the original data census sources did not always allow for full comparability across countries, and in some cases over time comparability within a given country. One salient feature did result from this update. It takes a very long time to register a significant improvement upon the country's human capital stock, as the latter is measured by the mean level of educational attainment of the labor force. Such findings underscore the importance of sustained educational policies to improve access to those who otherwise will not attend or drop out of school today, so that the country will have an increased human capital stock tomorrow.

Standard one-sector growth models often have the counterfactual implication that economies with access to similar technologies will converge to a common balanced growth path. We propose an elaboration of the Diamond model that permits multiple, locally stable stationary states. This multiplicity is due to increasing social returns to scale in the accumulation of human capital.

Many theories of economic growth stress the role of human capital in the form of education, but empirical studies have been hampered by inadequate data. We describe a data set on educational attainment that we have constructed for 129 countries over five-year periods from 1960-1985. We use census/survey information to fill over 40% of the cells, and we use school enrollment figures in a perpetual-inventory framework to fill the remainder. The data refer to male and female attainment of the adult population at four levels: no-schooling. primary. secondary, and higher. We also provide a rough breakdown into incomplete and complete attainment at the three levels of schooling. We then take account of cross-country variations in the durations of schooling at each level to provide figures on total years of attainment.

For 98 countries in the period 1960–1985, the growth rate of real per capita GDP is positively related to initial human capital (proxied by 1960 school-enrollment rates) and negatively related to the initial (1960) level of real per capita GDP. Countries with higher human capital also have lower fertility rates and higher ratios of physical investment to GDP. Growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment. Growth rates are positively related to measures of political stability and inversely related to a proxy for market distortions.

The authors describe the techniques and data adopted for the construction of a new series of estimates of the stock of education in 85 countries over 28 years (1960-87). It covers all the important developing regions except the republics of the former Soviet Union. The International Economics Department (IEC) continues a well-established trend in growth research of using educational stock (measured as mean school years of education of the labor force) as a proxy for human capital. The series are built from enrollment data using the perpetual inventory method, adjusted for mortality. Estimates are corrected for grade repetition among school-goers and country-specific drop-out rates for primary and secondary students. Enrollment data series used start as far back as 1930 for most countries, and even earlier for others. This reduces the need for backward extrapolation of enrollments to provide the initial estimates of the investment inventory.

This paper examines whether the Solow growth model is consistent with the international variation in the standard of living. It shows that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data. The paper also examines the implications of the Solow model for convergence in standards of living, that is, for whether poor countries tend to grow faster than rich countries. The evidence indicates that, holding population growth and capital accumulation constant, countries converge at about the rate the augmented Solow model predicts. This paper takes Robert Solow seriously. In his classic 1956 article Solow proposed that we begin the study of economic growth by assuming a standard neoclassical production function with decreasing returns to capital. Taking the rates of saving and population growth as exogenous, he showed that these two vari- ables determine the steady-state level of income per capita. Be- cause saving and population growth rates vary across countries, different countries reach different steady states. Solow's model gives simple testable predictions about how these variables influ- ence the steady-state level of income. The higher the rate of saving, the richer the country. The higher the rate of population growth, the poorer the country. This paper argues that the predictions of the Solow model are, to a first approximation, consistent with the evidence. Examining recently available data for a large set of countries, we find that saving and population growth affect income in the directions that Solow predicted. Moreover, more than half of the cross-country variation in income per capita can be explained by these two variables alone. Yet all is not right for the Solow model. Although the model correctly predicts the directions of the effects of saving and

The authors explore the strength of female secondary education relative to, and in combination with, family planning and health programs in reducing fertility and infant mortality. They find that family planning and health programs do influence fertility and mortality, but that the impact of expanding female secondary enrollments appears to be much greater, especially in countries with low female secondary enrollment. Fertility and infant mortality are more elastic with respect to female secondary education than to family planning and health programs. Their simulations suggest the following. Doubling female secondary school enrollment (from 19 to 38 percent) in 1975 would have reduced the total fertility rate in 1985 from 5.3 to 3.9. Doubling the family planning service score (from 25 to 50 percent) in 1982 would have reduced the total fertility rate only from 5.5 to 5.0. Doubling female secondary school enrollment in 1975 from 19 to 38 would have reduced the infant mortality rate from 81 to 38. Halving the ratio of population per physician would have reduced the infant mortality rate only from 85 to 81. Doubling per capita GDP from $650 to $1,300 would have reduced the infant mortality rate only from 98 to 92. Doubling female secondary school enrollment (from 19 to 38) in 1975 would have lowered the number of births by 29 percent of the 1985 number. Doubling family planning services would have reduced it by 3.5 percent. Doubling female secondary school enrollment would have reduced infant deaths by 64 percent. Halving the ratio of population per physician would have reduced it only by 2.5 percent. Doubling per capita GDP has no effect on reducing infant deaths, all other factors being constant. Female education affects desired family size by raising the opportunity cost of a woman's time in economic activities, increasing demand for family planning, and promoting more effective contraceptive use.

This paper outlines a theoretical framework for thinking about the role of human capital in a model of endogenous growth. The framework pays particular attention to two questions: What are the theoretical differences between intangibles like education and experience on the one hand, and knowledge or science on the other? and How do knowledge and science actually affect production? One implication derived from this framework is that the initial level of a variable like literacy may be important for understanding subsequent growth. This emphasis on the level of an input contrasts with the usual emphasis from growth accounting on rates of change of inputs. The principal empirical finding is that literacy has no additional explanatory power in a cross-country regression of growth rates on investment and other variables, but consistent with the model, the initial level of literacy does help predict the subsequent rate of investment, and indirectly, the rate of growth.

The authors describe the techniques and data adopted for the construction of a new series of estimates of the stock of education in 85 countries over 28 years (1960-87). It covers all the important developing regions except the republics of the former Soviet Union. The International Economics Department (IEC) continues a well-established trend in growth research of using educational stock (measured as mean school years of education of the labor force) as a proxy for human capital. The series are built from enrollment data using the perpetual inventory method, adjusted for mortality. Estimates are corrected for grade repetition among school-goers and country-specific drop-out rates for primary and secondary students. Enrollment data series used start as far back as 1930 for most countries, and even earlier for others. This reduces the need for backward extrapolation of enrollments to provide the initial estimates of the investment inventory.

Policy-makers and analysts typically use differences between the school enrolment ratios of different countries or regions to justify educational investment. The authors argue that although the enrolment ratio is a readily available statistic, it may not be the most appropriate indicator for setting investment priorities in education. The report assesses the effective supply of human resources available for economic growth, and captures the degree in which flows translate into human capital stocks. They argue that enrolment ratios alone are an insufficient basis for determining educational policies or priorities because they give a false (upwardly biased) impression of the educational attainment of a country's human resources. They conclude, instead, that statistics on the educational composition of the labour force, constitute a more sensitive human capital index.