Private versus Social Returns to Human Capital: Education and Economic Growth in India

Our findings indicate that the growth in educational capital in India in the period 1961 to 2001 had a positive effect on both economic growth at the state level and on industry growth at the industry level in states with small governments, but no statistically significant effect in states with a large share of government workers. Overall, the findings are consistent with a theory in which large governments are soaking up many educated individuals without them having positive effects on economic growth.