Working Paper Series: Special Edition of 2016 to 2018 Interns

4.2 Mincerian Human Capital Specification Results of the Mincer specification are presented in Table 4. The important take-away from these results is that the effect of one additional year of average years of schooling causes income per worker to increase by approximately 14.9 per cent. 8 A survey of relevant literature revealed no studies of this type. There are no empirical studies that used St Vincent and the Grenadines as a case study, nor included it in a cross-country analysis aimed at investigating returns to education. Table 4: Production Function, Mincerian Human Capital Specification Dependent Variable: GDP/worker Total Average Years Explanatory Variables Constant 3.701*** (3.522) % Change of Capital/Worker 1.883** (2.210) % Change of Capital/Worker [-1] -0.286 (-0.324) Log GDP/Worker [-1] -0.424*** (-3.947) Log Capital/Worker [-1] -0.034 (-0.409) Average Years of Schooling [-1] 0.090*** (3.277) DUMMY1972 0.146*** (3.530) DUMMY1975 -0.124** (-2.671) Effect of 1 Additional Year of Avg. Schooling 0.149 R-Squared 0.614 S.E. of Regression 0.042 F-Stat 4.475 Prob 0.000 N 43 *** - Significant at 1%, ** - Significant at 5%, * - Significant at 10%, T-statistics inparenthesis, Source: Author’s Calculations. Loening (2005) estimated the additional year to increase income per worker by 18.4 per cent in Guatemala, while Psacharopoulos (1994) estimated the average mincerian rate of return to total average years of schooling for Latin America and the Caribbean to be 12.4 per cent. 9 Griffith (2001) estimated the rates of return to the different levels of education for neighbouring Barbados, 8 Following Loening (2005), this is calculated by dividing the long-run school variable by the loading coefficient, the result is then divided by 1 minus the loading coefficient. 9 The Bahamas and Jamaica were the only CARICOM nations included in this study.

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