The Mankiw-Romer-Weil growth model and the valuation of human capital.¤ T.Huw Edwards Centre for the Study of Globalisation and Regionalisation

This note examines the measure of human capital implicit in Mankiw, Romer and Weil’s 1992 paper on ’A Contribution to the Empirics of Economic Growth’. It is argued that MRW’s methodology fails to take account of cross-country di¤erences in the costs of acquiring human capital, and so implies an excessive di¤erence in human capital between advanced countries and developing countries, where acquiring human capital is cheaper. The implication of this is that the equation which they successfully ...t to cross-country data is not, in fact, consistent with the Solow constant returns to scale growth model, but implies increasing returns to scale and, on plausible factor share assumptions, is in fact similar in its main properties to some endogenous growth models, having constant returns to substitution..