| Abstract: |
Theoretic growth models and microeconomic evidence suggest that human capital
accumulation is an important determinant of per capita income growth. However,
outliers, measurement errors, and incorrect specifications may have affected
early macroeconomic studies that found a weak relationship between growth and
human capital accumulation. While recent studies addressing these problems are
beginning to show larger positive effects, the potential endogeneity of human
capital accumulation has received relatively little attention. In this paper,
we demonstrate that endogeneity is significant and find that natural disasters
are a good instrument for changes in schooling. Our resulting instrumental
variable estimates are larger than our OLS estimates and are generally larger
than those in previous studies. Our analysis also provides some limited
evidence of human capital externalities. |