contribution to economic growth ranging from less than I percent in Mexico to as high as 23 percent in Ghana (Psacharopoulos 1984).

In the late 1980s, as dissatisfaction with the neoclassical growth framework, endogenous growth models began to emphasize the accumulation of human capital, which is not subject to diminishing returns. In these models, growth is explained by endogenously driven technical change, which may be brought about by a variety of factors: learning by doing (Romer 1986), spillover effects of human capital formation (Lucas 1988), production externalities of public expenditure (Barro 1990), and quality improvements through the invention of new products (Grossman and Helpman 1991).

While these theories have incorporated human capital or education as an important input to growth, empirical evidence is still far from unanimous and conclusive. Numerous studies, some using cross-country data, have investigated the relationship between formal education and economic growth in developing countries. While many studies found that additional years of education per person in the labor force increase real output or growth rates (World Bank 1991, 1993 for example), a few studies found that human capital accumulation had a significant negative or an insignificant impact on economic or productivity growth.

Using cross-country data from 91 countries, Pritchett (1996) found a large and significant negative impact of human capital accumulation on productivity growth. Pritchett offered three possible explanations: schooling creates no human capital, the marginal returns to education are falling rapidly where demand for educated labor is stagnant, and perverse institutional environments have misdirected educated labor to activities that reduce economic growth. Islam (1995) finds consistently negative and significant coefficients on the natural log of years of schooling in panel estimates of the level of income. This finding replicated with various panel and GMM estimators in Hoeffler (1997). Benhabib and Spiegel (1994) and Spiegel (1994) find a negative effect for increased years of schooling using a standard growth accounting framework. Spiegel (1994) shows that the negative effect is robust to the inclusion of a wide variety of variables such as regional dummies, size of the middle class, political instability, share of machinery investment, and inward orientation.

Lau, Jamison, and Louat (1991) estimated the Cobb-Douglas production function using log-difference variables, employing panel data for 58 developing countries. They investigated the effects of education level in five regions and found that education had an estimated negative effect in Africa and the Middle East and North Africa and insignificant effects in South Asia and Latin America; only in East Asia was the effect positive and significant. Jovanovic, Lach, and Lavy (1992), using annual data on a different set of capital stocks and the NSD education data, find similar negative coefficients for their sample of developing countries. The World Bank's _World Development Report 1995_ on labor issues also notes the lack of importance of education in explaining aggregate growth (World Bank 1995, figure 2.4). Using other proxies for human capital, such as adult literacy and enrollment, gives similar results. Behrman (1987) estimated a production function using data from 68 developing countries, and found that literacy has a positive effect on output in the level regressions while it has a significantly negative coefficient in the differences regressions. Dasgupta and Weale (1992) find that changes in adult literacy are not significantly correlated with changes in output. Gregorio (199?) studied the growth experience of 12 Latin American countries and found enrollment indices have negative but insignificant coefficients on growth.

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