The Effect of Education on Economic Growth

Topics: Capital accumulation, Economics, Economic growth Pages: 12 (3672 words) Published: April 7, 2013
The Effect of Education on Economic Growth


Education is one of the primary factors of development. Countries can’t achieve economic development without investment in human capital. Vocational training and higher education equip a worker to perform certain jobs or functions .It improves the quality of their lives and leads to social benefits to individuals and society like improving income distribution. Education increase people's productivity and creativity and promotes entrepreneurship and technological advances. Technological progress reflects the growth of human knowledge. The purpose of this paper is to examine the role of investment in human capital in promoting economic growth and technological progress. Some empirical studies conclude that there is strong evidence that skills of population are powerfully related to long run economic growth. However, another study finds the linkage to be insignificant and some find the economic growth depends negatively on the cost of education or on the barriers to get education.


Many researches have shown there is a strong positive relationship between investment in human capital and economic growth .scholars and policymakers focus on income growth to measure economic growth and the improvement in the standard of living of humans in the United States and in foreign countries. One of the policies that policymakers focus on to improve per capita income in a country is improve the quality of education or increase human capital .the main resource of this conclusion comes from the human capital theory. the theory says educated workers have higher human capital and thus higher productivity. Therefore, education increases the worker earning potential. The result of Some empirical studies find out that human capital and growth rate of GDP have positive relationship .increase spending on higher education leads to increase in per capita income, but some studies find the linkage to be insignificant. While some studies found that the differences in human capital can explain at most 40% of the differences in output per capita in some countries. There are also some concerns about the study of the effect of education on economic growth. One of these concern is the absence of effective communication and accumulation among the scholars who studied this topic. Some of the research didn’t recognize the differences in comparing countries , states, regions or provinces. Another concern is incompetent discussion of how educational effect can be measured or specified. Some studies didn’t show the differences between education spending, per pupil expenditure, pupil-teacher ratio, and teachers salaries. Also, there is less agreement of how education quality can be measured and how to distinguish between quantity and quality of education. Although there are some disagreements about this topic, the majority of the scholars agreed about the positive relationship between education and economic growth. In the next section we will discus some of theses research but first we will have an idea about how education measured.

The measurement of education

To measure the level of education for a person ,we need to take into account some variables such as the number of years spent in school, the quality of schooling , curriculum ,and the student’s GPA. However, getting an accurate measure of these variables is difficult expect for the years of schooling. It is not accurate to determine the quality of education based on the student performance in exams. Also as we mentioned earlier, some scholars believe pupil-teacher ratios measure the quality of education, while others think it is only measure of the quantity of education because pupil teacher ratios reflect what is done with the investment in education. There is a difference between how macroeconomic and microeconomics determines the impact of education on...
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