Educational Research / Theodore Breton

This paper presents evidence that education has direct and indirect effects on national output. Educated workers raise national income directly because schooling raises their marginal productivity. They raise national income indirectly by increasing the marginal productivity of physical capital and of other workers. In highly educated countries the spillover effect on other workers is minimal, but in less-educated countries the spillover effect appears to be much larger. In all countries, the positive effect of rising human capital on the productivity of physical capital is required to offset the diminishing returns to investment in physical capital and make rising investment in physical capital financially viable in the growth process

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