More recent studies have addressed the econometric and specification problems in this first generation of studies, and typically find a larger impact of female education on growth than of male education on growth (Abu-Ghaida and Klasen, 2004). Dollar and Gatti (1999), for example, find that negative returns to female education disappear once regional dummy variables are included in the specification; they hypothesize that the earlier result was driven by the low growth and high educational for women that characterized Latin America for the period of the study.<sup>30</sup> Klasen (2002) estimates the effect of the gender gap in years of total schooling in the adult population on per capita income growth, using cross-country and panel regressions for the 1960-1992 period for 109 industrial and developing countries.<sup>31</sup> He estimates both a structural model (which includes a direct impact of education on growth, an indirect effect via increased investment, an indirect effect via lower population growth, an indirect effect via the interaction of population growth and investment, an indirect effect via labor force growth, and an indirect effect via the interaction of labor force growth and investment) and a reduced form model. His findings are striking: the direct and indirect effects of gender inequality in educational attainment account for 0.95 percentage points of the 2.5 percentage point gap in growth rates between South Asia and East Asia, 0.56 percentage points of the 3.3 percentage point gap between sub-Saharan Africa and East Asia, and 0.85 percentage points of the 1.9 percentage point gap between the Middle East/North Africa and East Asia.

What is the intuition behind these results? Klasen (2002) argues that assuming that boys and girls have a similar distribution of innate abilities, gender inequality in education implies that less able boys will have access to education. If human capital is some combination of innate ability and education, this means that the overall level of human capital in society will be lower than it would be in the absence of gender inequality in education—and overall economic growth rates would suffer.<sup>32 33</sup> A simulation assuming a 70-30 percent male-female split of those children receiving education—as opposed to a 50-50 percent split—leads to a decline of 12 percent in average human capital, assuming innate ability is normally distributed and assuming that 50 percent of all children go to school. Using the estimated relationship between human capital and GDP growth from a well-known panel study yields a 0.3 percentage point decline in annual growth (Klasen, 2002).

> 30 See Knowles et al. (2002) and Lorgelly (2000) for careful reviews of this literature.

> 31 Klasen uses a variety of techniques to deal with potential simultaneity between economic growth rates and educational attainment, including instrumental variables and using only initial levels of educational attainment which are not affected by growth in the subsequent period.

> 32 Given Klasen’s argument, raising the average level of human capital in society would at an extreme imply increasing gender equality in schooling by removing boys with lower innate abilities from the schooling system until the distributions of innate abilities of school-going children of both genders are equalized.  Equalization can also come about by raising the ability cut-off for boys and reducing the ability cut-off for girls.  The result of such a change on average human capital accumulation of children who attend school is however ambiguous.

> 33 There are other, less direct links between female education and growth.  Higher female education leads to better educational outcomes for children—this increase in human capital should increase worker productivity and promote economic growth in the future.  Economic growth may also be boosted because more educated workers increase the returns to physical investment, which raises investment and hence growth.  Finally, higher female education will result in lower fertility rates.  Lower fertility, in turn, may stimulate growth by promoting capital deepening and by lowering the dependency ratio.  A lower dependency ratio, in turn, will boost savings rates and per capita incomes (Klasen, 2002).

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