Dec 11, 2013

Higher Education and Economic Growth

Via Michael Clemens I saw this very interesting paper which claims that higher education contributes to economic growth. You might think that that is a pretty obvious link, however, if you look at economic development textbooks, or if you see the priorities in terms of education of international organizations and governments, you will see that more attention is given to elementary education, and relatively little - or none - to university education. Some textbooks even claim that investing in higher education is a waste of resources because educated people leave poor countries. Obviously not all educated people emigrate. And you might want to look at the benefits of emigration

The paper is written by Harvard scholars David Bloom, David Canning, Kevin Chan, and Dara Lee Luca, and it is titled "Higher Education and Economic Growth in Africa." 

In the paper this is the conceptual framework:
The main idea of the paper is that higher education helps poor countries to catch up with rich countries through the channels that you see in the conceptual framework above. 

We see the results of higher education in the long term, when university educated people start to occupy important leadership positions in society. In those positions university education can make a huge difference. For example in a basic microeconomics class a country leader can learn the negative effects of price controls. 

If university education is so important it will be good to ask why some countries have better higher education systems than others. From an economic point of view you can think about a higher education industry, which like any other, develops faster and better when there is free competition and fair opportunity of entry. And that is exactly what I think is harming this industry in developing countries. It is very hard for new entrants. They key lessons here is that we should make as easy as possible to new entrants to set up universities. Or at least much easier than it is right now. 


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