Catch me if you learn: development-specific education and economic growth

This paper presents a theoretical and empirical investigation of the relationship between human capital composition and economic growth and points to the importance of tertiary education in the explanation of growth for developing countries. In the theoretical analysis, we allow for non-constant returns to scale in technological activities. Differently from previous literature, our results show that, under broad and plausible model parameterizations, the marginal growth effect of skilled workers is increasing with the distance to the frontier for sufficiently poor countries while it is decreasing (in agreement with the existing literature) only for countries close to the technological frontier. Our empirical analysis provides robust evidence for this theoretical prediction using a 10-year panel of 85 countries for the years in between 1960 and 2000 as well as using System GMM technique to address the problem of endogeneity. Results are robust to different proxies of human capital and different specifications.