Cross national data show no association between increases in educational capital due to rising educational attainment of the labor force and the rate of growth of output per worker. This implies the association of growth of educational capital and conventional measures of TFP is large, strongly statistically significant, and negative. While these are the regression results “on average ” (from imposing a constant coefficient) it should be obvious the impact of education has not been the same in every country. There are three explanations for why the impact of education has varied and has so often fallen short of what was hoped. First, perhaps educational has been so low that “years of schooling ” have created no human capital. Second, perhaps the marginal returns to education fell rapidly as supply expanded while demand for educated labor was stagnant. Third, perhaps the institutional environment has been sufficiently perverse that the educational capital accumulation lowered economic growth. Some mix of the three explanations plays a role in most developing countries. 2 Where has all the education gone? 1 To be a successful pirate one needs to know a great deal about naval warfare, the trade routes of commercial shipping; the armament, rigging, and crew size of potential victims;

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I document in this paper a puzzle that has not received previous attention in the literature. In 1980-98, median per capita income growth in developing countries was 0.0 percent, as compared to 2.5 percent in 1960-79. Yet I document in this paper that variables that are standard in growth regressions -- policies like financial depth and real overvaluation, and initial conditions like health, education, fertility, and infrastructure generally improved from 1960-79 to 1980-98. Developing country growth should have increased instead of decreased according to the standard growth regression determinants of growth. The stagnation seems to represent a disappointing outcome to the movement towards the "Washington Consensus" by developing countries. I speculate that worldwide factors like the increase in world interest rates, the increased debt burden of developing countries, the growth slowdown in the industrial world, and skill-biased technical change may have contributed to the developing countries' stagnation, although I am not able to establish decisive evidence for these hypotheses. I also document that many growth regressions are mis-specified in a way similar to the Jones (1995) critique that a stationary variable (growth) is being regressed on non-stationary variables like policies and initial conditions. It may be that the 1960-79 period was the unusual period for LDC growth, and the 1980-98 stagnation of poor countries represents a return to the historical pattern of divergence between rich and poor countries.

To quantify the implications of common currencies for trade and income, we use data for over 200 countries and dependencies. In our two-stage approach, estimates at the first stage suggest that belonging to a currency union/board triples trade with other currency union members. Moreover, there is no evidence of trade-diversion. Our estimates at the second stage suggest that every one percent increase in a country’s overall trade (relative to GDP) raises income per capita by at least one third of a percent. We combine the two estimates to quantify the effect of common currencies on output. Our results support the hypothesis that important beneficial effects of currency unions come through the promotion of trade.

This paper analyzes how property rights affect the allocation of firms' available resources among different types of assets. In particular, we investigate emp irically for a large number of countries whether firms in environments with more secure property rights allocate available resources more towards intangible assets and consequentially grow faster. We find that improved asset allocation due to better property rights has an effect on growth in sectoral value added equal to improved access to financing arising from greater financial development. The results are robust using various samples and specifications, including controlling for growth opportunities.

this paper is to address this issue by assessing the relationship between exchange rate regimes and output growth for a sample of 154 2

We uncover a significant negative correlation between various volatility measures and private investment in developing countries, even when adding the standard control variables. No such correlation is uncovered when the investment measure is the sum of private and public investment spending. Indeed, public investment spending is positively correlated with some measures of volatility. These findings suggest that the detrimental impact of volatility on investment may be easier to detect using disaggregated data. We provide several possible interpretations for our findings. Nonlinearities in preferences or budget constraints can cause volatility to have first-order negative effects on private investment.

After years of poor macroeconomic performance, many Latin American countries undertook ambitious programs of macroeconomic stabilization and structural reform during recent years. The change in policy created high expectations for the region. Some observers question, however, whether actual growth outcomes in several Latin American countries have measured up to such expectations. This paper offers some evidence that the response of economic growth to reforms in Latin America has not been disappointing. Because of the significant changes in policies achieved in Latin America by the 1990s and in spite of the global slowdown, Latin America did well to return to its historic rate of growth of 2 percent per capita in 1991-93. Latin American growth has responded to changes in policy variables as would have been predicted by the experience of other times and places, as summarized by a panel regression spanning a large number of countries and multi-year periods from 1960 to 1993. In order to obtain consistent estimates of the parameters linking policy variables and growth, this paper uses a dynamic panel methodology that both controls for unobserved time- and country-specific effects and accounts for the likely joint endogeneity of the explanatory variables.

Notes: Center Discussion Papers are preliminary materials circulated to stimulate discussions and critical comments. We thank seminar participants at Yale University and Joe Altonji, Eileen Brooks, and Valery Lazarev for helpful comments and suggestions. Fairlie was partially funded by the William T. Grant Foundation. The views contained herein are solely those of the authors, and do not necessarily represent those of the institutions with which the authors are associated. Menzie D.

test scores are strongly related to growth. Indirect specification tests are generally consistent with a causal link: direct spending on schools is unrelated to student performance differences; the estimated growth effects of improved labor-force quality hold when East Asian countries are excluded; and, finally, home-country quality differences of immigrants are directly related to U.S. earnings if the immigrants are educated in their own country but not in the United States. The last estimates of micro productivity effects, however, introduce uncertainty about the magnitude of the growth effects. (JEL O40, I20, J24) Recent theoretical analyses of international differences in growth rates have focused attention on the role of human capital. Most crosscountry empirical studies of long-run economic growth now include some proxy for human capital, and these are invariably significant. Data limitations have, however, forced severe