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Has the Expansion of Higher Education Led to Greater Economic Growth?

Published online by Cambridge University Press:  26 March 2020

Craig Holmes
Craig Holmes*
Affiliation:
Oxford University
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Abstract

There is an enduring belief by UK policymakers that a large higher education sector is an important driver of long-run economic growth, which has been part of the narrative since the Robbins Report. Back then, there was plenty of conjecture and assumption, but strikingly little concrete evidence to support such a belief. This paper asks whether the evidence base has strengthened in the 50 years since it was published. It looks at a number of different growth equation specifications and, using international education data, attempts to draw out the contribution of both the number of, and the growth in, graduates since the 1960s. There are three main findings. Firstly, many growth relationships, including those estimated elsewhere in the literature, are quite sensitive to the countries included – which often depends on the variables used – and time period of analysis. I argue that, given these issues, growth equations should always be treated with caution. Secondly, and remembering this caveat, neither the increase nor the initial level of higher education is found to have a statistically significant relationship with growth rates both in the OECD and worldwide. This result is robust to numerous different specifications. Thirdly, there is some evidence, consistent with the existing literature, that levels of technical skills at the end of compulsory education matter. The employment of higher level technical skills (proxied by the number of employed researchers in an economy) is also a strong predictor of growth. This gives a possible mechanism linking the output of (some) of the higher education sector with economic growth. However, it does not imply that mass higher education necessarily leads to higher growth. This depends on the skills produced by an expanding tertiary sector and their utilisation (or underutilisation) in the jobs available to increasing numbers of graduates.

Keywords

Economic growthhigher educationskillsO4I25O38
Type
Research Articles
Information
National Institute Economic Review , Volume 224 , May 2013 , pp. R29 - R47
Copyright
Copyright © 2013 National Institute of Economic and Social Research

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Footnotes

I would like to thank Ken Mayhew for his advice and suggestions. I'm also thankful for the helpful comments of three anonymous referees that have greatly improved my research.

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