Page 11 - Education and Inclusive Growth --Jong-Wha Lee Korea University

Education and Inclusive Growthc157

(i) growth in physical capital stock; (ii) growth in labor input; (iii) growth in

human capital per worker; and (iv) TFP growth.
dY dK dH dA
(4) = v h + v h +
Y K K H H A
where dX/X represents the percentage rate of change of the variable X, and

v and v are the share of capital and labor income respectively. If the production
K
H
function exhibits constant returns to scale in K and H, all the income associated
with the real output Y is attributed to capital and labor. That is, v + v = 1. In
H
K
this case, Equation (4) can be also expressed in per worker terms as follows:
dY dK dH dA
(5) = (1 – v )h + v h +
Y H K H H A
Then, the growth of output per worker (y Þ Y/L) is decomposed into three
components: the growth in physical capital per worker (k Þ K/L), the growth

in human capital per worker (h) and the total factor productivity growth (A).
Hence, we can measure the contribution that human capital made to per worker

output growth.
The growth accounting is applied to a broad number of countries over the
period 1981-2014 using data on GDP and physical capital stock from the Penn-
World Tables (PWT) 9.0 (Feenstra, Inklaar, and Timmer, 2015). Labor shares by

countries and over time are also available from the PWT 9.0. The working-age
population is sourced from the United Nations (2015).

The overall labor input is an aggregate of all labor inputs classified in
seven educational levels, weighted by the relative productivity (or relative wage
rates), as in Equation (2). While no detailed data on wage rates for all individual
countries is available, international data on the education-wage profiles derived

from the Mincerian equation are compiled for a broad number of countries
by Psacharopoulous (1994). In this approach, the wage rates of workers are
constructed based on the assumption that the marginal rate of return to an