The net effect of access to education on economic growth
One of the most important issues facing policy makers is that of stimulating economic growth. This growth can occur both in the form of new business creation as well as growth of existing firms. As such, many researchers have focused on the identification of factors, both macroeconomic and microeconomic, that lead to economic growth. While necessitating short-term sacrifice, economic growth is generally accompanied by job creation and in the long-run, should lead to community development, increased tax revenues, higher living standards and economic stability etc. While many factors are known to promote economic growth, the literature highlights the importance of access to education.
Ideally, access to education by both owners and employees will lead to an increase in entrepreneurial activity. However, this increase in entrepreneurial activity may lead to intense competition for resources and thus an ambiguous net effect on the economic growth.
The maintained hypothesis in this paper is that, while education may improve innovation, create new firms and enhance productivity for existing firms, the possible increase in entrepreneurial activities and intense competition for resources may have a negative effect on the growth rate resulting in a constant rate of growth at best. Assuming a competitive economy, the rate of growth may perhaps be negative in the long run.
To investigate this hypothesis, the authors use the data from the World Bank's Enterprise Surveys with an appropriate estimation method to adequately capture the said net effect (http://www.enterprisesurveys.org/).
JEL: L20, M21