Kiel Working Papers, Kiel Institute for World Economics
No 1408:
The Augmented Solow Model with Mincerian Schooling and Externalities
Kai Carstensen, Erich Gundlach and Susanne Hartmann
Abstract: We combine the augmented Solow model with the Mincer
equation to derive a specification that identifies an education externality
within a production function framework. The previous empirical literature
has not reached a consensus about the size of the education externality,
which is given by the difference between the microeconomic and the
macroeconomic return to education. Relative to our benchmark value that is
based on a parameterization of the derived specification, we find that the
estimated education externality is too large when the empirical model is
not properly restricted, and appears to be absent when all control
variables of the empirical model are properly accounted for. We note that
the absence of an education externality would be inconsistent with observed
levels education subsidies
Keywords: Augmented Solow model, education externalities, Mincer equation; (follow links to similar papers)
JEL-Codes: O4; (follow links to similar papers)
19 pages, March 2008
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