FDI,Education, and Economic Growth: Quality Matters

In this paper, we revisit the results from the influential study by Borensztein et al. (Journal of International Economics 45:115–135, 1998), which argues that inward foreign direct investment (FDI) promotes the economic growth in a less developed host country only when the host country obtains a threshold level of secondary schooling. Borensztein et al. (Journal of International Economics 45:115–135, 1998) only focus on the quantity of education. We take into consideration both the quantity and the quality of education. We adjust the original schooling data in Borensztein et al. (Journal of International Economics 45:115–135, 1998) by two quality of education indices and re-estimate their model. We find that the complementarity between inward FDI and schooling still exists, but the threshold level of schooling in our study is lower than the threshold calculated in Borensztein et al. (Journal of International Economics 45:115–135, 1998). Our results support the importance of education quality and suggest that with improved quality of education, it does not take as much quantity of schooling, as established in Borensztein et al. (Journal of International Economics 45:115–135, 1998), for inward FDI to have a positive impact on economic growth in the host country.     

Does Life Expectancy Affect Private Educational Investment in China？

In this paper, we emphasize the interactive effect between life expectancy and human capital accumulation, and test the positive feedback of longevity to educational investment in China. This is very important for understanding the pressure from the aging population and the increase in private educational investment in China. We first show in an extended human capital investment model that life expectancy growth acts as a driving force for educational investment. We then build a difference‐in‐difference‐in‐differences empirical framework and use cross‐province data to examine the effect in China. We use the maternal mortality rate (MMR) to identify the difference in life expectancy between genders, and the illiteracy rate or average years of education by gender for educational investment. The empirical results comply with the theory, in that increases in life expectancy significantly lower illiteracy rates and improve the average schooling years in China. This content of the present paper is closely related to crucial issues like population aging, human capital accumulation and gender discrimination. Policy implications are discussed based on the empirical results.     

The Impact of Increased School Enrollment on Economic Growth in Tanzania

Abstract: Two different positions prevail in the recent discussion on the impact of education on economic growth: those who support a positive correlation between schooling and economic growth rates and those who claim that the impact of schooling on growth has been overstated. What is intriguing about this discussion is that both positions are based on theory and the results from empirical studies. We examine the long‐term effects of increased school enrollment (and effective attendance) on economic growth in Tanzania using a dynamic computable general equilibrium (DCGE) model. We find that an increase in human capital formation in the long run leads only to a moderate increase of economic growth rates but to a substantial improvement of factor incomes to low‐education households, while overall income effects are Pareto efficient.     

Accounting for Gender Equality in Secondary School Enrollment in Africa

In addition to analyzing the characteristics of gender equality in secondary education enrollment in Africa, this paper empirically studies the key drivers of gender equality in secondary education enrollment, using cross‐sectional time series data from 1970 to 2010. Our results show that the coefficient associated with the level of real GDP per capita is positive and statistically significant in both the overall Africa sample and in the sub‐Saharan and North African samples. But the quadratic term of real GDP per capita is negative in sign and significant in the overall Africa and sub‐Saharan African estimates. These provide evidence of a hump‐shaped relationship between real GDP per capita and gender equality in secondary education enrollment in Africa. Our results also suggest that higher share of female teachers in secondary schools, increased democracy (at a decreasing rate), higher female share of the labor force, Christian dominance in a country, higher domestic investment rate, and being an oil‐exporting country increase gender equality in secondary education enrollment in the continent. However, higher population growth tends to lower it. The policy implications and lessons of these results are discussed.     

Multinational Enterprises,Technology Diffusion,and Host Country Absorptive Capacity: A Note

Abstract

Previous empirical studies show mixed support for the hypothesis that the impact of technology diffusion from multinational enterprises (MNEs) on host country productivity growth depends on host country absorptive capacity. One explanation is that the results of these empirical studies are sensitive to the measures of absorptive capacity used. This paper contributes to the empirical literature by investigating average years of schooling and total factor productivity gap as measures of host country absorptive capacity in 38 developed and developing countries. Panel data regression equations are estimated using a cross-sectionally heteroskedastic and timewise autoregressive (CHTA) model. The paper has two main results. The first result does not support the hypothesis that the technology diffusion from MNEs has a positive impact on the productivity growth in developing countries. The second result is that the total factor productivity gap is more appropriate than average years of schooling to measure host country absorptive capacity. This may suggest that the results of previous studies that used average years of schooling should be interpreted with caution.     

Understanding Cross‐Country Differences in Valuation Ratios: A Variance Decomposition Approach

We use a variance decomposition approach to examine why aggregate valuation ratios differ across countries. In a cross section of 22 developed countries from 1980 to 2009, we find that 50 percent of all cross‐country differences in the aggregate price‐to‐book ratio (P/B) can be explained by cross‐country differences in expected future five‐year profitability. In the second half of our sample period, this percentage exceeds that of the first half, rising to almost 64 percent. Although international differences in accounting standards and conventions may have made earnings from different countries more difficult to compare relative to dividends, we find that it is still cross‐country differences in expected future profitability, rather than dividend growth rates, that are more closely related to international differences in valuation ratios. Even among 25 emerging markets, we find that expected future profitability at the five‐year horizon can account for 29 percent of all cross‐country P/B variations. Our results show that international investors are able to identify substantial cross‐country differences in future‐earnings prospects and incorporate them into stock market valuations.     

How to Model a Child in School? A Dynamic Macrosimulation Study for Tanzania

Universal primary education is regarded as one of the key pillars of sustainable development. The positive influence of education on growth is supported by many empirical studies. However, the effects of education on labour supply, poverty reduction and welfare as well as subsistence agriculture are hardly traceable in an econometric set‐up, given the complex interactions and the long‐term nature of education. An economy‐wide dynamic simulation model provides a well‐suited toolkit to analyse the effects of increased school provision in these aspects and provides insights into the intertemporal aspects of the schooling decision of children. We develop a macroeconomic model that explicitly includes education and human capital allocation, and takes into account that the possibility of child labour increases the opportunity costs of human capital formation. In an application for Tanzania, we find that a large‐scale investment programme in education might have a negative effect on both gross domestic product (GDP) growth and high‐skilled labour supply in the short term but leads to higher GDP and welfare as well as significantly reduced child labour supply in the medium to long term.     

Does Schooling Promote Economic Growth?

Abstract: This paper revisits the debate on schooling and economic growth with particular reference to the case of sub‐Saharan Africa. Following the endogenous growth model developed by Lucas (1988) that considers human capital as one factor of production and schooling as a means of human capital accumulation, two results of schooling are explicitly stated: accumulation of privately owned and publicly owned human capital. By developing a growth estimating equation containing these two types of schooling results from the model and confronting it with empirical data, the hypothesis that schooling has got growth effect is tested. The analytic result suggests that in the indicated economies, for the period covered by the study (1966–2000), schooling that leads to accumulation of publicly owned human capital is associated with per capita income growth. Likewise, the analysis provides supporting evidence for the argument that primary schooling level is more associated with growth than other levels of schooling.     

MONEY,OUTPUT AND INFLATION IN AFRICAN ECONOMIES1

This paper examines the long‐run money‐inflation relation for 36 African countries using cross‐section and panel data analysis. The focus is on the recent claim by De Grauwe and Polan that the common finding in multi‐country studies of a strong positive link typically reflects the presence of high‐inflation countries in the sample and on Nelson's criticisms of the data and methodology employed in that study. Adjusting the De Grauwe and Polan methodology to take account of many of Nelson's criticisms, I confirm a weak long‐run relation between money growth and inflation for countries when money growth and inflation are below 10%, but a strong relation when money growth and inflation move much above that number. This result is not dependent on the inclusion of high inflation countries in the cross‐section and panel data samples.     

Forces of economic growth in China,India, and other Asian countries

This paper applies different approaches to modelling sources of economic growth from time series and panel data sets for 10 Asian countries over the period 1970–2010. After being subjected to fragility tests, the cross‐country estimates indicate that investment, together with policy variables and openness to trade, explains about 90 per cent of the estimated 3.2 per cent steady‐state growth rate for the region. Regional growth policy points to expanding trade, supporting financial development, and maintaining sound investment environments. Although country‐specific growth effects vary, the results imply that different estimation methods, combined with fragility tests, can help establish stronger links between growth theory and policy advice.     

Transparency,Information Shocks,and Tax Avoidance

This study helps provide clarity to the prior mixed findings on the association between financial reporting transparency and tax avoidance by studying the effect that transparency has on tax avoidance in a cross‐country sample through aggregate‐ and firm‐level tests. Results using firm‐ and country‐level (aggregate) measures of transparency and tax avoidance show that countries and firms with greater levels of transparency exhibit lower levels of tax avoidance and that the effect of country‐level transparency is incremental to firm‐level transparency. Furthermore, results of difference‐in‐difference tests using the adoption of IFRS and the initial enforcement of insider trading laws around the world as exogenous shocks that increase transparency find that transparency has a statistically and economically significant effect on tax avoidance and address empirical concerns regarding endogeneity and reverse causality not fully addressed in the prior research. The results of these tests as well as tests that address potential correlated but omitted variables suggest that financial transparency is an important tool which regulators can use in battling tax avoidance.     

Does Education Still Pay Off in Rural China： Revisit the Impact of Education on Off-farm Employment and Wages

The present study considers how education affects off-farm job participation and wages. We use a nationally representative dataset from a survey conducted in 5 provinces, 101 villages and 808 households by the authors in early 2005. The empirical results show that educational attainment, skill training and years of experience of rural residents have positive, statistically significant effects on off-farm employment. The average return to a year of education is 7percent, which is higher than those observed in previous studies. We also find the return to an additional year of schooling to be higher for post-junior high schooling than for junior high and below schooling： 11.8 versus 3.2 percent. We conclude that not only does education still pays off in rural China, but also the rate of return to education is increasing over time.     

Health and Productivity: Panel Data Evidence from Ethiopia

Abstract: Neoclassical growth models and endogenous growth theories show the positive contribution of human capital to growth. Using household panel data (1994–2000) on individuals who reported their wages in urban Ethiopia, we estimated a relationship between health measures (i.e. proxied by height and BMI) and wages (which proxies productivity/growth). Our findings from the IV quantile regression estimates indicate that productivity is positively and significantly affected by education, height and BMI. The return to BMI is important both at the lower and upper end of the wage distribution. The return to height is significant only at the end of the wage distribution. The substantive content of the results (i.e. the high‐nutrition and high‐productivity equilibrium story) does not change even if we did not control for endogeneity of schooling. Non‐parametric evidence also supports the strong and positive relationship between productivity and our indicators of human capital.     

Audit Fee Differential,Audit Effort,and Litigation Risk: An Examination of ADR Firms

Prior studies find that audit fees are higher for cross‐listed firms, and these studies primarily attribute the incremental fees to added litigation costs. In this study, we investigate whether the higher audit fees that foreign firms cross‐listed in the United States pay are also attributable to incremental audit effort associated with U.S. disclosure requirements and a more stringent U.S. auditing environment. By comparing audit fees of foreign cross‐listed firms to U.S. domiciled firms and to non‐cross‐listed foreign firms, we are able to decompose incremental audit fees into portions attributable to added audit effort and to added litigation costs. We find that, on average, foreign firms cross‐listed in the United States pay significantly higher fees than domestic U.S. firms and foreign firms that do not cross‐list. Furthermore, we find that audit effort is almost as important as litigation costs in explaining the higher fees associated with foreign cross‐listed firms; our estimates suggest that between 29 percent and 48 percent of the incremental fees are attributable to incremental audit effort. In addition, the total cross‐listing premium is increasing in the difference between the U.S. auditing regulatory environment and that of the home country of the cross‐listed firm. Our study improves our understanding of the role of audit effort in explaining the added fees charged by auditors when foreign firms cross‐list in the United States.     

Wage Returns to Schooling in Nigeria

Abstract: In the last two decades, primary and secondary school enrollment rates have declined in Nigeria while enrollment rates in post‐secondary school have increased. This paper estimates from the General Household Survey for Nigeria the private returns to schooling associated with levels of educational attainment for wage and self‐employed workers. The estimates for both men and women are small at primary and secondary levels, 2–4 percent, but are substantial at post‐secondary education level, 10–15 percent. These schooling return estimates may account for the recent trends in enrollments. Thus, increasing public investment to encourage increased attendance in basic education is not justifiable on grounds of private efficiency, unless investments to increase school quality have higher private returns. With high private returns to post‐secondary schooling, students at this level should pay tuition, to recoup more of the public costs of schooling, which may be redistributed to poor families through scholarships.     

Human Capital and Hours Worked of Children in Cambodia: Empirical Evidence for Policy Implications*

This study uses data from the Cambodian Child Labor Survey 2001/02 (CCLS‐2001/02) to investigate the trade‐off between child labor and their human capital formation. It also investigates the determinants of child schooling and that of the income earned from child labor. This study finds that children's education is a significant determinant of their wage rate, which implicitly explains the logic behind the household's decision to allow a child to both work and study, and thus explains why parents keep investing in their children's education. We also find that non‐poor households and fathers’ and mothers’ education have statistically significant effects on child schooling. Finally, this study has found that if children's average working hours are below the threshold level of 22 h per week, then education is not affected. These research findings have policy implications for the human capital development of children, as well as for broader social policy in Cambodia.     

Education and development in the South African context

In line with international experience it is now widely accepted in South Africa that education has an important role to play in development, particularly of socio‐economically disadvantaged communities, although there is less certainty now than in the sixties as to what that role is. It cannot be governed solely by the manpower needs of the economy: men and women have their own equally important needs. Nor can this role be effective as long as education is equated with formal schooling, particularly where the schooling of the majority in society has been neglected over a long period. While the formal education system is undergoing reform and regeneration, and attention is being given to the critical issues of equality of opportunity and the legitimacy of the system, it is imperative that high priority should be given to non‐formal adult education. In all fields of education there is a need to give greater thought to issues of relevance and quality, rather than to seek salvation in “more of the same”.     

Prostitutes,Pimps, and Brothels: Intermediaries,Information, and Market Structure in Prostitution Markets

Prostitution is a multi‐billion dollar, globally distributed, low‐concentration service industry that is receiving increasing attention in the economics literature. This article focuses on a widespread, but little studied, feature of this environment—the role of intermediaries (pimps or brothel owners) on market outcomes. Prostitution laws and markets are perhaps unique in that transactions between principals (prostitutes and johns) are legal in many countries, while intermediary activity (pimping) is illegal. After surveying the varying cross‐country legality of agents we develop a simple theoretical model to analyze how the presence or absence of intermediaries shifts the distribution of market surplus. We show that eliminating pimps and brothels may shift surplus in non‐obvious ways, depending on the precise function they perform and on whether equilibrium is pooling or separating across “high quality” and “low quality” market segments. The implications of alternative policy regimes (intermediaries legal or illegal) are considered.     

Hitting the Target: Doubling Primary School Enrollments in Sub-Saharan Africa by 2015

This paper estimates the number of children who will need to attend and complete primary school in sub-Saharan Africa in order for the current international development target of universal primary education (UPE) by 2015 to be attained. In addition, a variety of demand constraints that will also affect the attainment of UPE are identified and assessed. The main conclusion of this analysis is that target enrollment growth for the region as a whole between 2000 and 2015 is not much greater than enrollment growth during the 1990s. For at least half of all countries in the region, however, this will require very high levels of sustained enrollment growth during the next 15 years. There are also major concerns about the overall level of demand for primary education by individuals and households. In particular, formal sector employment contracted in many countries during the 1990s and returns to education in the smallholder agriculture and informal sectors continue to remain low. But, with sufficient commitment from governments and donor agencies to increase educational capacity and improve the quality of schooling, the UPE target can be attained as part of a comprehensive strategy for poverty reduction in each country.     

Human capital in Britain, 1760–2009

Human capital can be defined as the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being. It is arguably one of the most important determinants of economic growth. In general, human capital has been calculated with two different approaches: (1) retrospective method through the expenditures on education, (2) prospective through the discounted sum of the wages it would receive over the expected number of remaining working years. In this paper we use the prospective method to calculate human capital in the UK from the mid-eighteenth century to the present, providing the by far longest estimate for human capital for any country. To overcome the problems related to the scarcity of historical data, we developed a method which is able to make the most efficient use of the scarce data available for the eighteenth and nineteenth centuries. Our calculations show a 112-fold increase of human capital, and a 13-fold increase of human capital per worker and per capita from 1760 to 2009. Using cumulative schooling expenditures from 1833 to 2000, we examine whether increased spending on schooling explains this phenomenal growth in human capital.