Schooling and distortions in a vintage capital model

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Description/Abstract

This paper integrates the analysis of choices on education and on technology adoption
to study international economic disparities. Two candidate explanations are considered:
di¤erences in distortions that a¤ect the cost of technology adoption and di¤erences in the
e¤ectiveness of schools. The implications of these two factors for di¤erences in output per
capita, educational attainment, and the age of technologies across-countries are assessed in a
vintage capital model with technology-speci…c learning-by-doing. Predictions are obtained
for a parameterized economy that matches US aggregate observations and evidence on
learning. Di¤erences in investment distortions produce plausible correlations only if the
major role of education is to improve the ability to learn technologies. On the other hand,
di¤erences in school e¤ectiveness produce plausible results only if the role of education is
to provide a productive ability that is independent of learning.