Education vs TFP: Empirical Evidence from The Sub-Saharan Countries

Guido Cazzavillan and Michael Donadelli

No 2012_27, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: This paper investigates the "education-total factor productivity trade-off" in explaining per worker income differences between Sub-Saharan (unlucky) and G7 (lucky) economies. Following Hall and Jones (1999) and Caselli (2005), on a country basis, we are able to study separately the dynamic of the average years of schooling (i.e. education level), the per worker capital, the per worker income, and the total factor productivity (TFP). We confirm, according to the related literature, that physical capital and education levels partially explain income differences between unlucky and lucky economies. We show, however, that the impact of ad hoc TFP shocks on per worker income is larger in the unlucky economies than in the lucky ones. The result holds both for negative and positive shocks. In particular, we find that average TFP volatility in the �unlucky world� is eight times higher than the �G7 world� average TFP volatility. As a result we argue that the order of magnitude of the impact heavily depends on the level of the TFP volatility. It turns out that the effect of a TFP shock on a relative low per worker income growth rate is higher. We conclude by arguing that the presence of low levels of per worker capital and of human productivity push the unlucky economies into a poverty trap.

Keywords: Education; Average Years of Schooling; TFP Shocks; Poverty Trap (search for similar items in EconPapers)
JEL-codes: I24 I25 O10 O11 O16 O47 O55 (search for similar items in EconPapers)
Pages: 25 p
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Education vs TFP: Empirical Evidence from The Sub-Saharan Countries (2012)
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