Education and growth in East Asia

In the new endogenous growth and augmented Solow models, human capita is central to the growth process. Its role in the diffusion of knowledge and technology offsets the diminishing returns to physical capital that otherwise occurs. Per capita output thereby grows, given appropriate policies, without bounds. This paper applies production functions with education externalities to the rapidly growing countries of East Asia. It tests for the net effects of differences in policies concerning enrollments vs expenditures at each level, and for feedbacks through the effect of education on rates of physical capital investment. It finds that since most countries had universal primary education early, the rate at which secondary education expanded (necessary to successful exports), was crucial in achieving high rates of investment and high per capita growth. Secondary and higher education expenditures are more significant after primary enrollments are universal. There is evidence of convergence within the region. (C) 998 Elsevier Science Ltd. All rights reserved.