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.