Roles of Education in Productivity Growth in Australia, 1860–1939

Abstract

Despite a significant literature comparing Europe and the USA, and linking education and human capital to growth and development, there is virtually no research in the Australian context which attempts to investigate this link empirically. Australia is an interesting case because it was one of the world's wealthiest nations in the late nineteenth century. The economy was built on agriculture and mining, but there was no obvious evidence of a natural resource curse despite losing ground on the leading nations. This study fills a gap in the literature by examining the effect of education and schooling on productivity growth between 1860 and 1939 using a unique dataset from the colony of Victoria. Using a growth accounting exercise, we examine the role of productivity changes in the overall growth picture of Victoria and Australia as a whole. We find evidence for productivity‐led growth for both. Exploring the relationship between productivity and education measures, we find that while primary school enrolments were important to sustain productivity growth throughout the period, tertiary education was more effective in the first half of the twentieth century.