mario draghi : education and economic growth lectio magistralis by mr mario draghi, governor of the bank of italy, at the inauguration of the 100th academic year, university of rome “ la sapienza ”, economic faculty, rome, 9 november 2006. * 1. * * education and development italy set out on a path of rapid development after the second world war and kept on it for more than a quarter - century. a substantial part of the country ’ s disadvantage with respect to those with higher levels of economic welfare was made good. although it was marked by sometimes acute social tensions and distributive conflicts, growth benefited from several domestic and external factors that made for extremely large productivity gains. increasing resources, which had been largely underutilized in the agricultural sector, were employed in the sectors with higher output per worker, completing the transition to an industrial economy. this unprecedented rapid and sustained growth was accompanied by a progressive rise in the educational level of the population that fitted nicely with the state of technological knowledge. since the 1990s the inrush of the emerging economies on the international markets and the advent of the new information and communications technologies, biotechnologies and thin material technologies have radically altered the characteristics of global economic development. they have created new hierarchies, revolutionized production processes and, especially in the advanced countries, thoroughly modified the characteristics of the labour input demanded by firms. the ample strand of economic literature that investigates the connection between education and development has gained new vigour. broadly speaking, the level of education carries decisive weight in explaining processes of economic growth from two fundamental angles. one concerns the improvement of knowledge applied to production : human capital formation fuels efficiency in production and drives up the remuneration of labour and the other factors of production. this engine of growth becomes still more important in phases characterized by rapid technical progress. in the 1960s edmund phelps observed that the acquisition of advanced knowledge was an essential condition for innovation and for adapting to new technologies. the endowment of human capital assumes a crucial value that transcends those who benefit from it in the first instance : it promotes the generation and diffusion of new ideas that impart impetus to technical progress ; it improves earnings prospects and, closing the virtuous circle, increases the incentive for further investment in human capital. as a primary source of accumulation of this type of capital, the educational system produces major externalities that help raise the growth prospects of the entire economy. this is one of the

to bordering countries. but the premises would appear to be in place for an extension of its international role in both trade and finance. the transatlantic link is extremely precious and must be cultivated at the policy level. new prospects will open up shortly. to overcome today ’ s challenges, it will be necessary for objectives to be shared and decision - making to be based on solidarity. the united states and europe, more closely united, are a guarantee for the world ’ s stability.