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ISSN 2385-2275 No. 11 - May 2015

Where has all the education gone? Nowhere, but too much

National School of Development, Peking University


Lant Pritchett (2001) asked a famous question, “Where has all the education gone?” bringing the lack of correlation between the growth of measured education and the growth of income in developing countries to broad attention. This finding confirms that after WWII the human capital-output ratios tend to be higher in less developed countries than those in developed countries. I explain this pattern using a dynamic general equilibrium model which explicitly considers that workers with different types have different costs when choosing schooling years and employers are unable to directly observe workers’ types, and find that simulation results with public subsidies to schooling could well mimic the features of data. At last, I make a speculative but reasoned conjecture about the schooling years-output relation in 2040.

 JEL Classification: D82, E24, I25, O15, O47

 Keywords: education, informational asymmetry, signaling model, general equilibrium, heterogeneity



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