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Title: The Macroeconomics of Education

Citation Type: Conference Paper

Publication Year: 2005

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Abstract: We will in particular emphasize that Europe has invested massively in the past decades in secondary education and along some dimensions, prevented a too large increase in wage and income inequality. Since the 1960s, the average number of years of education of the working age population has risen by 3.5 years, and half of the gap with the US has been filled. Recent cohorts of young graduates in Europe are more mobile than low skilled workers, and the over-education problem, meaning young graduate delaying ever and ever the entrance in the labour market, probably need to be more cautiously analysed: it appears that over-education is often the wrong name given to something else we believe to be one of Europes main problem: skill mismatch and inadequacy of education and training to provide the right skills. On the negative side, we indeed see several manifestations of an inadequacy between demand and supply of skills and workers. Europe has very low geographical mobility of labour even for the most educated ones, especially compared to the US; there is a very large share of European workers reporting they dont have the right skills for the job; more generally, labour market institutions promote longevity of jobs and thus favour specific skills, while at the same time demand for labour is increasingly volatile and would require general skills instead; finally, Europe faces difficulties to attract the most skilled and talented workers, with potentially large adverse consequences on long-run growth. As argued above, more investments in education are required, but they must come with well-thought provisions of incentives: first, incentives to do well must be imposed on the supplier of skills (secondary schools and tertiary establishments); and second, incentives to follow the right curriculum must be brought to the consumers of education (students and trainees). It is only if these conditions are fulfilled that Europe can simultaneously reach the dual objective of promoting equality and generating growth. Investing in secondary education is probably a good way to promote equality. Instilling a greater element of incentives is necessary if Europe wants to garnish universities with the same worldwide prestige and attractiveness as Harvard, Princeton or MIT and ultimately develop a knowledge-based economy.

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Authors: Peri, Giovanni; Messina, Julian; Lamo, Ana; Fredriksson, Peter; Wasmer, Etienne

Conference Name: Seventh European Conference of the Fondazione Rodolfo Debenedetti

Publisher Location: Venice, Italy

Data Collections: IPUMS USA

Topics: Education, Other

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