The causal effect of education on aggregate income

• Authors: Marcelo Soto.
• BSE Working Paper: 394 | September 15
• Keywords: human capital , income growth , GMM estimation , development accounting
• JEL codes: O11, O47, C33
• human capital
• income growth
• GMM estimation
• development accounting

Empirical studies assume that the macro Mincer return on schooling is constant across countries. Using a large sample of countries this paper shows that countries with a better quality of education have on average relatively higher macro Mincer coefficients. As rich countries have on average better educational quality, differences in human capital between countries are larger than has been typically assumed in the development accounting literature. Consequently, factor accumulation explains a considerably larger share of income differences across countries than what is usually found.