This article presents a brief overview of the theoretical approaches in relation to the link between education / human capital and economic growth and a summary of results from the main empirical macro-studies. The paper also provides a survey of empirical macro-studies which refer to Greece. Economic theoretical literature confirms that education/human capital contributes on economic growth. Since the ‘60s, and mainly since the early ‘90s the empirical macro-studies have showed that the effect of education on growth is positive while in a few studies the effect is statistically non significant or negative. The macro-studies have also investigated the causality between education and economic growth. The main empirical evidence suggest that in the most cases there is a causal relation running from education / human capital to economic growth while in a few studies there is a bidirectional causality. In Greece, the empirical findings of the macro-studies showed unidirectional and in some cases a bidirectional causality between education and economic growth. Additionally, education and especially secondary and higher education have had a positive impact on economic growth.
Τhe multidimensional role of learning and knowledge has been stressed initially by Solon (639-559 B.C), Socrates (470-399 B.C), Plato (428-347 B.C), Aristotele (384-322 B.C), et al. Most lately, A. Smith (1776) wrote about the economic value of education. After World War II, the concept of “human capital” was defined and the “human capital theory” was constructed. According to this theory education is the principal institutional mechanism of the production, accumulation and diffusion of human capital (Schultz, 1960, 1961, 1964; Becker, 1962, 1964; Mincer, 1974 et al). Economic literature has investigated the link between education / human capital and economy. Different theoretical approaches and models about the relationship between education / human capital and economic growth have been developed by distinguished economists.
According to the existing literature there are mainly three channels through which education can contribute to economic growth: (a) education facilitates the diffusion and transmission of knowledge which is necessary to understand and process new information and to implement new technologies successfully, also leading to economic growth (Nelson and Phelps, 1966) ; (b) education increases human capital inherent in labour force, which enhances labour productivity and thus transitional growth towards a higher equilibrium level of output (augmented neoclassical growth theories, Mankiw, Romer and Weil, 1992), and; (c) education can increase the innovative power of an economy as well as knowledge on new technologies, products and processes that promote growth (theories of endogenous growth Lucas, 1988; Romer, 1990).
Education, as the main element of human capital formation, has attracted the attention of many economists, which led to various models of economic growth which introduce education as one of the sources of economic growth. Micro and macro approaches about the relationship between education / human capital and economic growth have been discussed in the economic literature. Both macroeconomic literature (Pereira and Aubyn, 2009; Odit et al., 2010) and microeconomic literature (Psacharopoulos, 1995; Bouaissa, 2009) stress the importance of human education/capital in the process of economic growth. Microeconomic approaches investigate the educational externalities and attempt to determine the effect of education on an individual’s earnings.
There is a large amount of evidence on the returns to education to the individual. Since education delivers economic benefits to individuals, we should also expect to see the effects of education on groupings of individuals (nations). A classic micro on this topic study was provided by Mincer (1974). Macroeconomic approaches attempt to measure the impact of education on productivity. These approaches emphasize the role of investment in education as a vehicle to increase total factor productivity. In these studies, education/human capital contributes to enhanced productivity of the labour force and subsequent growth in national income.
Specifically, the role of education/human capital on economic growth has been highlighted by different authors. Mankiw-Romer-Weil (1992) (M-R-W) augmented Solow’s (1956) model with human capital as an additional production factor, while endogenous growth models (Lucas, 1988; Romer, 1990) directly relate human capital and technology adoption. The purpose of this paper is firstly to present a brief review of theoretical and empirical literature on the link between education / human capital and economic growth and secondly to present an extensive overview of empirical macro studies, which have investigated the relationship between education and economic growth in Greece. The rest of this paper is organized as follows: Section 2, presents a review of the theoretical approaches on the link between education / human capital and economic growth. Section 3, presents a short review of empirical literature on the relationship between education / human capital and economic growth and mainly an extensive review of macro-studies on the relationship between education / human capital and economic growth in Greece. Section 4 contains the concluding remarks.
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