Distributional Growth Accounting: Education and the Reduction of Global Poverty, 1980–2019

This paper constructs the first estimates of the aggregate and distributional effects of worldwide educational expansion since 1980 by developing a “distributional growth accounting” framework that isolates the contribution of schooling to economic growth by income group. The framework integrates the canonical labor supply-and-demand model of education and the wage structure (à la Goldin and Katz 2007) with standard growth accounting tools, applied to a new microdatabase covering household surveys in 150 countries and representative of approximately 95% of the world’s population, alongside new country-specific estimates of private returns to primary, secondary, and tertiary schooling. Under conservative assumptions — relying on standard Mincerian returns, assuming capital income is unaffected by schooling, and abstracting from human capital externalities — education can account for approximately 50% of global economic growth, 70% of income gains among the world’s poorest 20% of individuals, and 40% of extreme poverty reduction since 1980; it also explains over 50% of improvements in the share of labor income accruing to women. A key mechanism is imperfect substitutability between skill groups: as educational expansion raises the supply of skilled workers, their relative wage falls, redistributing income toward low-skilled workers and amplifying education’s equalizing effect at the bottom of the distribution — a channel that canonical cross-country growth accounting misses, causing it to underestimate education’s contribution to poverty reduction by a factor of approximately three. Combining these indirect investment benefits from education with direct government redistribution (from a companion paper) brings the total contribution of public policies to extreme poverty reduction to at least 50%.

Global Working Hours

Drawing on about 5,000 labor force and household surveys from 160 countries that cover 97% of the world’s population, this paper builds a new global database of hours worked and shows that hours worked per adult decline only slightly with GDP per capita and are weakly correlated with economic development overall: the unconditional elasticity of hours with respect to GDP is about -0.04 across countries and -0.01 within countries over time, GDP explains roughly 5% of cross-country and under 1% of within-country historical variation in hours, and the implied reduction is 0-20% over the entire development spectrum. The strong age and gender gradients the authors document are, in their cross-country regressions, driven less by development itself than by institutions: hours worked by the young (aged 15-19) and the elderly (aged 60+) fall with development almost entirely because of rising school attendance and public pension coverage, while prime-age (20-59) hours stay roughly flat but undergo what the authors call a “great gender reshuffling,” in which falling male hours per worker are quantitatively offset by rising female labor force participation. Across countries and over time, labor taxes are strongly negatively correlated with prime-age hours worked; controlling for government transfers only partly reduces this link, which the authors read as ruling out income and substitution effects on labor supply as the only driver, while controlling for working-hours regulations and the size of the formal sector reduces the link much more sharply, suggesting to them that regulation—not just the incentive effects of taxes—plays a large role in shortening intensive-margin hours in richer countries. The authors conclude that collective choices and social norms, often encoded in public policy (schooling, pensions, cultural norms about women’s work, and hours regulation), powerfully shape working hours over and above pure economic development. These are correlational cross-country and time-series patterns rather than identified causal effects, and hours are measured as weekly hours in all GDP-producing jobs (including unpaid agricultural work but excluding unpaid home services).

Amory Gethin | Macro Paper Warehouse

Distributional Growth Accounting: Education and the Reduction of Global Poverty, 1980–2019

Global Working Hours