Abstract
Abstract Although European economic history provides essentially no support for the view that education of the general population has a positive causal effect on economic growth, a recent paper by Becker, Hornung and Woessmann (Education and Catch-Up in the Industrial Revolution, 2011) claims that such education had a significant impact on Prussian industrialisation. The author shows that the instrumental variable BHW use to identify the causal effect of education is correlated with variables that influenced industrialisation but were omitted from their regression models. When this specification error is corrected, and a systematic model selection procedure is used, the evidence shows that education of the general population had, if anything, a negative causal impact on industrialisation in Prussia.
Highlights
Many theories of economic growth emphasise the role of education as a causal factor in the growth process.1 In this context, education is often interpreted as meaning education of the general population, and this is the sense in which the term ‘education’ will be understood throughout the present paper
BHW analyse the contribution of education to Prussian industrialisation using a dataset for the 334 Prussian counties that existed in 1849.4 The major institutional reforms which took place in Prussia after military defeat by France in 1806 made it possible, by about 1820, for Prussia to benefit from the technological advances that had occurred in Britain
This leads to an ineluctable conclusion: panel analysis of the BHW dataset cannot throw any light on whether education had a causal influence on Prussian industrialisation
Summary
Many theories of economic growth emphasise the role of education as a causal factor in the growth process. In this context, education is often interpreted as meaning education of the general population, and this is the sense in which the term ‘education’ will be understood throughout the present paper. European economic history provides little support for the view that education of the general population has an important causal influence on economic growth Both education levels and income per capita increased in most European economies between 1550 and 1900, no study has so far been able to show that this association reflects a causal effect of education on growth rather than rising incomes enabling people to consume more education. When the regression models are specified in such a way that pre-industrial education is a valid instrument, there is no evidence that education had a positive causal influence on overall industrialisation in Prussia: if anything, the causal effect was negative. The view that education of the general population plays an important positive role in the growth process, whether by facilitating the adoption of new technologies or by any other causal mechanism
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