6 - Further Details on the Role of Education and Technology in the Productivity Performance among the Advanced Industrial Countries

Summary

The Role of Education

There are three paradigms that appear to dominate current discussions of the role of education in economic growth. The first has stemmed from human capital theory. The second could be classified as a catch-up model. And the third important approach has stressed the interactions between education and technological innovation and change.

The Human Capital Approach

Human capital theory views schooling as an investment in skills and hence as a way of augmenting worker productivity (see, for example, Schultz 1960, 1961, and 1971; and Becker, 1975). This line of reasoning leads to growth accounting models in which productivity or output growth is derived as a function of the change in educational attainment.

The early studies on this subject showed very powerful effects of educational change on economic growth. Griliches (1970) estimated that the increased educational attainment of the U.S. labor force accounted for one-third of the Solow residual, the portion of the growth of output that could not be attributed to the growth in (unadjusted) labor hours or capital stock, between 1940 and 1967. Denison (1979b) estimated that about one-fifth of the growth in U.S. national income per person employed between 1948 and 1973 could be attributed to increases in educational levels of the labor force. Jorgenson and Fraumeni (1993) calculated that improvements in labor quality accounted for one-fourth of U.S. economic growth between 1948 and 1986. Maddison (1987), in a growth accounting study of six OECD countries covering the years 1913 to 1984, generally found that increases in educational attainment explained a significant proportion of productivity growth, though the contributions varied by country and subperiod.