published in: Scandinavian Journal of Economics, 2010, 112(3), 618-639
The perpetual inventory method used for the construction of education data per country leads
to systematic measurement error. This paper analyses the effect of this measurement error
on GDP regressions. There is a systematic difference in the education level between census
data and observations constructed from enrolment data. We discuss a methodology for
correcting the measurement error. The standard attenuation bias suggests that using these
corrected data would lead to a higher coefficient. Our regressions reveal the opposite. We
discuss why the measurement error yields an overestimation. Our analysis contributes to an
explanation of the difference between regressions based on 5 and on 10 year firstdifferences.
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