Are average years of education losing predictive power for economic growth? An alternative measure through structural equations modeling

Abstract

The accumulation of knowledge required to produce economic value is a process that often relates to nations economic growth. Some decades ago many authors, in the absence of other available indicators, used to rely on certain measures of human capital such as years of schooling, enrollment rates, or literacy. In this paper, we show that the predictive power of years of education as a proxy for human capital started to dwindle in 1990 when the schooling of nations began to be homogenized. We developed a structural equation model that estimates a metric of human capital that is less sensitive than average years of education and remains as a significant predictor of economic growth when tested with both cross-section data and panel data.

Measuring Energy Poverty and Its Impact on Economic Growth in Pakistan

“…These outcomes are reported in Table 6. It is worth mentioning that the long-run coefficients of the variables are normalized and hence the signs are reversed [56]. For instance, the first coefficient of energy poverty implies that a 1% increase in energy poverty will lead to a 0.052% decrease in economic growth [3].…”

“…Total gross value added is used as proxy of economic growth and treated as the dependent variable of the model [54]. For the independent variables, the study uses the data of gross fixed capital formation as proxy of physical capital accumulation, whereas the data of average years of schooling age 15 and above is used as a proxy indicator of human capital (study extends the data of "Average years of total schooling, age 15+, total" by utilizing the methodology of Barro-Lee) [55,56]. In neo-classical growth theories labor is considered as a source of growth while in new growth theories human capital is treated as the engine of growth.…”

Regional development trap and economic complexity in Turkey: Evidence from provincial data

“…In addition, education is often considered the most critical factor for developing human capital. As such, measures such as mean years of schooling have been widely used in the literature (Breton, 2011; Hanushek & Woessmann, 2012; Laverde‐Rojas et al, 2019). However, due to the lack of available data on mean years of schooling for Turkish provinces, we sought out the most suitable alternative.…”

Regional development trap in Turkey: Can relatedness find a way out?

“…Education is often considered the most critical factor for developing human capital. As such, measures such as mean years of schooling have been widely used in research (Breton, 2011; Hanushek & Woessmann, 2012; Laverde‐Rojas et al, 2019). However, due to the lack of available data on mean years of schooling for Turkish provinces, we sought out the most suitable alternative.…”