Messinis, George and Sheehan, Peter (2004) Economic Growth in Australia: Efficiency Wages or Human Capital? In: Proceedings of the Australian Conference of Economists, 2004. Economic Society of Australia, Sydney, Australia.

Abstract

The literature of human capital models of economic growth faces serious measurement and estimation issues and Glaeser and Saiz (2003) and Gronau (2003) reflect a shift to paying more attention to identification problems. This paper examines the idea that the human capital-growth nexus is spurious due to efficiency wages. Bewley (1999b) argues that efficiency wages elicit higher productivity. The paper derives new estimates of human capital for the Australian BLS data, utilises dual growth accounting and relies on an efficiency wages asymmetry to test the efficiency wages hypothesis against that of human capital. It also revisits the debate on alternative models of the human capital-economic growth relation. The results show that the efficiency wages hypothesis is not consistent with the evidence and both the level and growth of human capital are key determinants of economic growth. Paper presented to the 33rd Conference of Economists, University of Sydney, 27-30 September

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