Why Doesn't Human Capital Accumulation Always Contribute to Growth?

Recent empirical studies question the conventional wisdom about the importance of education for growth. We test the hypothesis that this may be the case if human capital is diverted from growth-promoting activities to rent-seeking activities that are socially useful to reduce the negative effects of distortions. We estimate conditional convergence equations on panel data in which the elasticity of human capital depends on the level of distortions. Our results, for a sample of eighty countries from 1960 to 1990, strongly suggest that the more countries erect barriers to trade and constrain civil liberties, the less human capital accumulation contributes to growth