Question

My friend Suzanne is the supreme ruler of humanity, and, using her powers, randomly assigns some countries to offer free college to all residents and others not to. The countries which offer free college have much higher GDP 20 years later than the countries which do not. What would this indicate about the signaling and human capital theories of education?

Answer 1

Education signals the effeciency of the population. The human capital theory of eduation imply that the production function of such economies will shift up and launch the economy on a higher growth path. These also imply that the population is well learned and is interactive and thus a rather more responsible voter. Not only is the productivity of the educated labour force is higher it is also has a higher ability to choose a more productive governemnt in the decomratic setup. Thus the country is bound to have a higher GDP level.