Page 10 - Education and Inclusive Growth --Jong-Wha Lee Korea University

156 ᐿ࿲ၾආӉj઺ԃٙɢඎ

Role of Education in Output Growth

This section appraises the contribution of education to output growth using

country-level data based on two standard approaches (Barro and Sala-Martin,
2004). The first one is based on the conventional Solow-type growth accounting.
The basic assumption of this approach is that an increase in educated workers

raises output through the improvement of labor productivity, controlling for
other contributing factors such as physical capital stock and technological
advances. The other one is cross-country regression which assesses the

contribution of education or human capital to differences in growth rates of per
worker output across economies while controlling for other important growth
determinants.

The growth accounting methodology proposed by Solow (1958)
decomposes the growth rate of the total output of an economy into components
associated with changes in factor inputs and total factor productivity (TFP),
which reflects technological progress.

Let's assume a standard production function such as
(3) Y = F (K, H, A) = F (K, hÒL, A)

where Y is real output, K the stock of physical capital, and H labor input,
and the A measures the level of technology or TFP. Here, labor input H is a
concept of the overall labor input or human capital stock. The aggregate labor
input is defined as H = hÒL where L is total work-hours (or number of workers)

and h is a measure of labor quality or average human capital stock per worker
which reflects an increase in the average years of schooling for the labor force.

Then, based on the growth accounting approach, the growth of output Y
can be easily decomposed into the contribution of four productive components: