Returns to Education and the Mankiw-Romer-Weil result

Mankiw, Romer and Weil [1992] found that, by adding a measure of school enrolment to capital and labour, a cross-country regression displays income convergence. However, their assumption that this derives from an augmented Solow model requires implausible differences in educational productivity across countries. By contrast, if educational productivity is constant, their fitted equation would be consistent with AK-type spillovers in goods production, but where educational costs damp growth. The MRW result suggests that endogenous growth theorists can be right about either technological spillovers or rising educational productivity, but not about both.