Human Capital in Economic Development: From Labour Productivity to Macroeconomic Impact

Micro-econometric evidence reveals high private returns to education, most prominently in low-income countries. However, it is disputed to what extent this translates into a macro-economic impact. This paper projects the increase in human capital from higher education in Malawi and uses a dynamic applied general equilibrium model to estimate the resulting macroeconomics impact. This is contingent upon endogenous adjustments, in particular how labour productivity affects competitiveness and if this in turn stimulates exports. Choice among commonly applied labour market assumptions and trade elasticities results in widely different outcomes. Appraisal of such policies should consider not only the impact on human capital stocks, but also adjustments outside the labour market.

Debunking Mill’s “Fourth Fundamental Proposition on Capital”

J S Mill’s enigmatic "Fourth Proposition on Capital" has been brought to our notice by Steven Kates (2015). Kates takes a positive view of the proposition. Our focus is not, however, on Kates, but on the aforesaid proposition. The purpose of this paper is to demonstrate, via close examination of Mill’s explanatory examples, just how unsatisfactory are its foundations. We conclude that the doubters are justified: Mill’s Fourth Proposition is, demonstrably, a muddle.