Book Description

This thesis is a collection of three empirical essays on growth, poverty and human capital inequality in a global panel. The objective of the first essay entitled: "Volatility and Growth: The Role of Education" is to examine whether the significance of volatility-growth relationship varies according to the average years of education. Unlike the focus of the previous literature on establishing the link between volatility and growth, we attempt to establish the channel through which volatility affects growth. The main contribution of our work is that while the level of volatility negatively affects growth, the effect is mediated via education. This is true even for countries with low as well as moderately high levels of volatility. The result of the interaction term, which is the key interest in this chapter, is robust to changes in definitions of variables and specification. This finding is consistent with Canton's (2000) theoretical work. The second essay, "Does Education Reduce Poverty in Developing Countries?" investigates the direct effects of education on poverty in developing countries using dynamic panel estimation techniques. The results suggest that higher education, developed financial system along with growth lead to significant poverty reduction. On the other hand, unequal income distribution is associated with increases in poverty. The results are robust to alternative model specification and estimation techniques. The policy implication is that poverty reduction is more effective if we focus on developing the education system instead of relying on growth and other channels, for example foreign aid or health. The third essay deviates from the usual study of inequality and globalization. It analyzes the relationship between seven measures of globalization and education inequality using a panel of 112 countries covering the period 1970-2009. We use the KOF index of Globalization and its three different dimensions (economic, social, and political) as our main proxy for globalization. In addition, we also employ openness, Foreign Direct Investment (FDI) and freedom to trade internationally (EF Index) in our study. We find that globalization has a robust negative effect on human capital inequality, even when we control for other factors. Results suggest that education inequality increases with globalization in middle and high-income countries but the effect is the opposite in low-income countries. This is the key contribution of our study where we find a variation of impact within the developing countries in contrast to the standard Hecksher-Ohlin Trade Theory. The result also holds when we restricted the sample to specific countries and add several other covariates. In contrast, the alternative measures of globalization have no such robust effects.