Full Citation

Title: Empirical Studies on Human Capital and Natural Resources

Citation Type: Dissertation/Thesis

Publication Year: 2006

ISBN: 9788469060094

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Abstract: The three chapters of this thesis present econometric studies on human capital and institutions, two important drivers of economic development. The empirical model in the rst chapter tries to improve on previous estimates of returns to education in Germany by taking into account the institutional features of the education system. The relationship between human capital accumulation and trade as well as the quality of institutions is analyzed in the second chapter of this thesis. The last chapter analyzes the e¤ect of natural resource and aid rents on a country’s quality of institutions. The rst chapter presents estimates of returns to education in Germany using an empirical model that captures the basic features of the German education system. It thereby overcomes some of the short-comings of previous empirical analyses. The main result is that di¤erences in the skill premiums across graduates from di¤erent secondary schools are large. In Germany there are three types of secondary schools: lower secondary (Hauptschule), middle secondary (Realschule) and upper secondary (Gymnasium) schools. Graduates from all three types of secondary school can engage in vocational training or apprenticeship training, but only graduates from the Gymnasium can access university. The empirical results indicate that annual returns to vocational training are more than four times higher for graduates from the highest secondary school compared to graduates from a lower secondary school. Least-squares estimation biases returns to vocational education of Hauptschule graduates upward by about 20 percent and implies a downward bias of more than 60 percent for Gymnasium graduates. The chapter also studies the determinants of educational choices, showing that the parents’ education level increases the probability of choosing a higher secondary school. The second chapter examines the e¤ect of trade on on-the-job human capital accumulation. This is central to economic growth theory, since both trade and human capital are often considered engines of economic growth. Economic theory, however, is ambiguous on whether trade increases or decreases on-the-job human capital accumulation. The chapter provides empirical evidence regarding the e¤ect of trade on on-the job human capital examination, using data on US immigrants. It is shown that estimated returns to countryof-origin experience of US immigrants are positively correlated with trade openness as well as institutional quality of the country of origin. The last chapter turns to the determinants of institutional quality in developing countries by addressing the question whether natural resources and aid are detrimental for the quality of institutions. It is shown that the e¤ect of several natural resource measures on institutional quality becomes signi cantly negative at high levels of ethnic fractionalization. This nding is robust to a variety of econometric speci cations. The results suggest that mineral and fuel abundance resource weakens institutions to the extent that it provides means and incentives to engage in civil con‡ict. The chapter also reaches the conclusion that in developing countries the relationship between aid ‡ows and institutional quality is di¤erent from that between natural resources and the quality of policies and institutions. Contrary to mineral and fuel rents, aid does not seem to be associated with lower institutional quality even when ethnic fractionalization is high. This nding contrasts with previous empirical evidence concluding that aid has a negative e¤ect on democracy which substantially exceeds the harmful e¤ect of oil rents.

Url: http://www.dagliano.unimi.it/media/domeland_2003.pdf

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Authors: Dömeland, Dörte

Institution: Univeritat Pompeu Fabra

Department: Economics and Business

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Pages: 132

Data Collections: IPUMS USA

Topics: Natural Resource Management

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