Abstract :
European economic growth has been weak, compared to the US, since the 1980s. In
previous work (Krueger and Kumar, 2003, NBER Working Paper No. 9410), we argued that
the European focus on specialized, vocational education might have been effective during the
1960s and 1970s, but resulted in a growth gap relative to the US during the subsequent
information age, when new technologies emerged more rapidly. In this paper, we extend our
framework to assess the quantitative importance of education policy, when compared to labor
market rigidity and product market regulation, other policy differences more commonly
suggested to be responsible for US–Europe differences. A ‘‘decomposition’’ exercise using a
calibrated version of our model assigns a major role to education policy in explaining
US–Europe growthdifferences.
r 2003 Elsevier B.V. All rights reserved.
