The Returns to Education: A Review of the Macro-Economic Literature

Abstract

authors and do not necessarily reflect the views of the Department of Education and Employment. All errors and omissions remain the authors. This work is from a forthcoming publication in the Department of Education and Employment Research Series. EXECUTIVE SUMMARY Over the last two decades there has been an outpouring of empirical work exploring the impact of ‘human capital ’ – a concept of worker quality and skills generally measured by formal education – on the level and growth of productivity. In this report, we review the empirical macro-econometric literature on productivity and education with a particular focus on UK policy. We detail over twenty studies, giving both summaries and critiques, as well as attempting to put all the studies in a common quantitative form The idea of positive educational externalities is that the benefits from education have the potential to spill-over to other individuals. The new growth theory emphasises the higher rate of innovation that can be generated by having more educated workers generating new ideas. There are also other types of education-related externalities that may have an effect on the level of GDP per capita (like lower unemployment, lower crime, etc.).

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