Education and Growth

The relationship between education growth and economic growth is a bit puzzling. More education does seem to benefit the individual, but it may not necessarily translate into increasing per capita incomes. So how do we resolve this micro-macro paradox?

As William Easterly argues in his book The Elusive Quest for Growth, its all about incentives. And so do in a way, Playforth & Schündeln who have worked with Indian data. They think that government is the culprit!

They hypothesize that educated people find privately rewarding jobs (which would contribute to the high estimates of returns to education at the micro level) in a sector in which social returns are low relative to the private returns (which would contribute to small or negative coefficients
on education growth in regressions at the macro level), namely the government sector.


Private versus Social Returns to Human Capital: Education and Economic Growth in India by John Playforth & Matthias Schündeln.