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The augmented Solow model with Mincerian schooling and externalities

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  • Carstensen, Kai
  • Gundlach, Erich
  • Hartmann, Susanne

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 is difficult to reconcile with observed levels of education subsidies for efficiency reasons.

Suggested Citation

  • Carstensen, Kai & Gundlach, Erich & Hartmann, Susanne, 2009. "The augmented Solow model with Mincerian schooling and externalities," Munich Reprints in Economics 19927, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:19927
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    Cited by:

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    3. repec:bla:germec:v:10:y:2009:i::p:378-383 is not listed on IDEAS
    4. Tomasz Brodzicki, 2015. "Shallow determinants of growth of Polish regions. Empirical analysis with panel data methods," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 39, pages 25-40.
    5. Bjarne S. Jensen, 2009. "Dynamic Extensions of the Solow Growth Model (1956): Editorial," German Economic Review, Verein für Socialpolitik, vol. 10(4), pages 378-383, November.
    6. Bjarne S. Jensen & Ulla Lehmijoki, 2011. "Homothetic Multisector Growth Models," DEGIT Conference Papers c016_001, DEGIT, Dynamics, Economic Growth, and International Trade.
    7. Tomasz Brodzicki, 2012. "Augmented Solow Model with Mincerian Education and Transport Infrastructure Externalities," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 6(2), pages 155-170, July.
    8. Zhu, Yanyuan & Feng, Xiao, 2014. "China's national production function since 1997: A reinvestigation," Working Papers in Economics 2014,2, Bundeswehr University Munich, Economic Research Group.

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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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