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

Roberto Roson

No 2022:07, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

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.

Keywords: Education expenditure; Human capital; Labor productivity; CGE models; Economic growth (search for similar items in EconPapers)
JEL-codes: C68 D58 E27 I20 J24 O11 O15 O41 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2022
New Economics Papers: this item is included in nep-edu
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Working Paper: Education, Labor Force Composition, and Growth A General Equilibrium Analysis (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2022:07

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