We are grateful to Yongsung Chang and three referees, particularly the final referee, for useful comments. Saasha Celestial-One provided excellent research assistance. Does Schooling Cause Growth? Barro (1991) and others find that growth and schooling are highly correlated across countries. A model is examined in which the ability to build on the human capital of one's elders plays an important role in linking growth to schooling. The model is calibrated to quantify the strength of the effect of schooling on growth by using evidence from the labor literature on Mincerian (1974) returns to education. The upshot is that the impact of schooling on growth explains less than one third of the empirical cross-country relationship. The model is extended to address the choice of schooling, showing that faster growth can induce more schooling by raising its effective return. Calibrating schooling choices suggests that this reverse channel can potentially explain one half or more of the observed relationship between schooling and

Abstract: Does economic development depend on geographic endowments like temperate instead of tropical location, the ecological conditions shaping diseases, or an environment good for grains or certain cash crops? Or do these endowments of tropics, germs, and crops affect economic development only through institutions or policies? We test the endowment, institution, and policy views against each other using cross country evidence. We find evidence that tropics, germs, and crops affect development through institutions. We find no evidence that endowments affect country incomes directly other than through institutions, nor do we find any effect of policies on development once we control for institutions.

I discuss the concept and empirical importance of intemational technology diffusion from the point of view of recent work on endogenous technological change. In this literature, technologyis viewed as technological knowledge. I first review the maj or concepts, and how intemational technology diffusion relates to other factors affecting economic growth in open economies. The following main section of the paper provides a review of recent empirical results on (i) basic results in intemational technology diffusion; (ii) the importance of specific channels of diffusion, in particular trade and foreign direct investment; (iii) the spatial distribution of technological knowledge, and (iv) other issues.

This paper investigates whether the industrial relations climate in Indian states has affected the pattern of manufacturing growth in the period 1958-92. We show that states which ammended the Industrial Disputes Act in a pro-worker direction experienced lowered output, employment, investment and productivity in registered or formal manufacturing. In contrast, output in unregistered or informal manufacturing increased. Regulating in a pro-worker direction was also associated with increases in urban poverty. This suggests that attempts to redress the balance of power between capital and labor can end up hurting the poor. JEL: H0,H1,I3,J5,K2,L5,L6,O2,O4 I.

In the 1990s, the idea of social capital—defined here as the norms and networks that enable people to act collectively—enjoyed a remarkable rise to prominence across all the social science disciplines. We trace out the evolution of social capital research as it pertains to economic development, and identify four distinct approaches: the communitarian view, the networks view, the institutional view, and the synergy view. All have their strengths, but our survey of the evidence suggests that the synergy view, with its emphasis on incorporating different levels and dimensions, and its recognition of the positive and negative outcomes that social capital can generate, has the greatest empirical support while lending itself to the most comprehensive and coherent policy prescriptions. Drawing on the empirical literature, we outline a conceptual framework incorporating the central findings from research at both the community and institutional level, and tease out the policy implications for poverty reduction programs. We conclude by arguing that a significant virtue of the idea and discourse of social capital is that it helps to bridge orthodox divides among scholars, practitioners, and policymakers. What is social capital? How does it affect economic development? How do we know? What are

Many economists and policy makers believe that education creates positive externalities. Indeed, average schooling in U.S. states is highly correlated with state wage levels, even after controlling for the direct e¤ect of schooling on individual wages. We use variation in child labor laws and compulsory attendance laws over time and across states to investigate whether this relationship is causal. Our results show private returns to education that are around 7 percent, and external returns to education that are in the neighbourhood of 1-2 percent and not signi…cantly di¤erent from zero.

Is a country’s ability to enforce contracts an important determinant of comparative advantage? To answer this question, I construct a variable that measures, for each good, the proportion of its intermediate inputs that require rela-tionship-specific investments. Combining this measure with data on trade flows and judicial quality, I find that countries with good contract enforcement specialize in the production of goods for which relationship-specific investments are most important. According to my estimates contract enforcement explains more of the pattern of trade than physical capital and skilled labor combined.

Abstract: This paper uses new statistical techniques and two new databases to reassess the relationship between economic growth and FDI. After resolving biases plaguing past work, we find that the exogenous component of FDI does not exert a robust, independent influence on growth.

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