Education quality and non-converge

Abstract

This paper assesses the role of education quality in the convergence process of GDP per capita through teachers quality impact in human capital formation. The simple two-period OLG model suggests initial level of teacher's human capital is important to explain non-convergence, even when education quality return is decreasing. This non-convergence arises because an initially low level of teachers' human capital translates into a low level of human capital transferred to students, which means a low level of teachers' human capital in the next period, and so on. It is also shown an education quantity-quality trade-off, despite all dynamics coming from quality evolution. This trade-off helps to explain why developing countries did not reached high GDP levels, despite recent evolution of average years of schooling in these countries. The paper, therefore, provides an alternative explanation for why countries income does not converge, even when differences in other inputs, such as capital stock, are not accounted for.