Mankiw et al. (1992) have extended the Solow (1956) model by augmenting the production function with human capital. Its empirical success is impressive and it showed a procedure to improve the explanatory power of the neoclassical growth model. This article suggests an empirical procedure to further extend the neoclassical growth model to distinguish between the growth and level effects of shift variables like the human capital. We use time-series data from Guatemala to show that while the growth effects of education are small, they are significant and dominate the level effects.
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Document Type: Research Article
Department of Economics, University of the South Pacific, Suva, Fiji
Department of Applied and International Economics, Massey University, Palmerston North, New Zealand
The World Bank, Washington DC, USA and University of Gottingen, Gottingen, Germany
Publication date: 2010-06-01
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