| Why are some countries rich, while others are poor? The seminal work by Schultz (1961) and Becker (1964) firmly established the importance of human capital regarding this question. In the 1980s and 1990s, with New Growth Theory, the theoretical insight widely became accepted that human capital is the main source of long-run economic growth. Yet, the empirical evidence so far has been inconclusive, mainly because of a lack of sufficiently long-run time series. To test the role of human capital, twentieth century Europe presents an ideal experiment. In Northwestern Europe, the level of education and income already was high in the nineteenth century, and this region was successful in adopting the new institutions and technologies of the Industrial Revolution, thereby apparently confirming human capital theory. Until the advent of World War II, both human capital and per capita GDP were at approximately the same level in Southern and Central Europe ? although relatively low compared with Northwestern Europe. This changed in the postwar period such that after 1990, while the levels of education in Central and Southern Europe were comparable, per capita GDP was substantially higher in the South. If human capital is indeed the main factor of long-run growth, this suggests a decrease in either the quality or efficiency of education in Central Europe under socialism. This proposal intends to explain these long term trends in human capital formation and economic growth in various parts of Europe, and to incorporate the role played by institutions influencing human capital. What were the long term effects of the switch to socialism that occurred in Central Europe after 1945/47 for human capital formation and growth? By comparing Central Europe with the South, and by using Northwestern Europe as a benchmark, the ways in which these institutions influenced long-run growth can be studied. |
