Education Composition and Growth: A Pooled Mean Group Analysis of OECD Countries

Abstract

This paper uses the pooled mean group (PMG) estimator and a dataset restricted to OECD countries to examine the relationship between different levels of education, i.e. between education composition and growth. The PMG estimator allows a greater degree of parameter heterogeneity than the usual estimator procedures used in empirical growth studies by imposing common long run relationships across countries while allowing for heterogeneity in the short run responses and intercepts. Results point to a significant longterm relationship not only between higher education and growth but also between lower schooling levels and growth. This indicates that public spending on education in OECD countries should be spread across the different levels of education in a balanced way.

Key words: Levels of education, Economic growth, Dynamic heterogeneous panels.
JEL: O50, C23.