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Education, Labor Force Composition, and Growth. A General Equilibrium Analysis

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  • Roberto Roson

    (Department of Economics, Ca' Foscari University of Venice; Loyola Andalusia University; GREEN Bocconi University Milan)

Abstract

We propose, in this paper, a novel approach to modelling education and human capital formation in a computable general equilibrium model. Rather than adopting microeconomic-based assumptions of human capital formation, the method is based on an empirical relationship between labor force composition and expenditure in education services. After realizing a set of econometric estimates, we found some robust relationship between workers' shares in the labor force and educational expenditure, in real terms and per capita. To assess the implications of these findings, we simulate, in a conventional CGE model for Ethiopia, the impact of an increase in public expenditure devoted to education. Our simulation results highlight the existence of a multiplicative effect, such that the overall increase in the supply of education services, in the final equilibrium state, is more than three times larger than the initial demand push. This comes associated with a positive supply shock, entailing gains in productivity, income, and welfare, as well as changes in the structure of the economy.

Suggested Citation

  • Roberto Roson, 2022. "Education, Labor Force Composition, and Growth. A General Equilibrium Analysis," Working Papers 2022:07, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2022:07
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    References listed on IDEAS

    as
    1. Wolfgang Britz & Roberto Roson, 2019. "G-RDEM: A GTAP-Based Recursive Dynamic CGE Model for Long-Term Baseline Generation and Analysis," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(1), pages 50-96, June.
    2. David N. F. Bell & David G. Blanchflower, 2021. "Underemployment in the United States and Europe," ILR Review, Cornell University, ILR School, vol. 74(1), pages 56-94, January.
    3. Jaison R. Abel & Richard Deitz, 2017. "Underemployment in the Early Careers of College Graduates following the Great Recession," NBER Chapters, in: Education, Skills, and Technical Change: Implications for Future US GDP Growth, pages 149-181, National Bureau of Economic Research, Inc.
    4. Erwin Corong & Thomas Hertel & Robert McDougall & Marinos Tsigas & Dominique van der Mensbrugghe, 2017. "The Standard GTAP Model, version 7," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 2(1), pages 1-119, June.
    5. Roberto Roson & Wolfgang Britz, 2021. "Simulating long run structural change with a dynamic general equilibrium model," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 11(4), pages 368-405.
    6. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
    7. Jung, Hong-Sang & Thorbecke, Erik, 2003. "The impact of public education expenditure on human capital, growth, and poverty in Tanzania and Zambia: a general equilibrium approach," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 701-725, November.
    8. Verbic, Miroslav & Majcen, Boris & Cok, Mitja, 2009. "Education and Economic Growth in Slovenia: A Dynamic General Equilibrium Approach with Endogenous Growth," MPRA Paper 17817, University Library of Munich, Germany.
    9. Angel Aguiar & Maksym Chepeliev & Erwin L. Corong & Robert McDougall & Dominique van der Mensbrugghe, 2019. "The GTAP Data Base: Version 10," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(1), pages 1-27, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Education expenditure; Human capital; Labor productivity; CGE models; Economic growth;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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