Education and growth: an industry-level of the portuguese manufacturing sector

Abstract

This paper investigates the education–growth link at the more disaggregate industry level in the Portuguese manufacturing sector with a focus on different levels of education. The insights from new growth theory and a modified and augmented version of the Benhabib and Spiegel (1994) specification are the basis for the empirical analysis of the role of education in innovation and imitation activities highlighting a role for specific schooling levels across industries according to their technological characteristics and its interaction with international trade. We use data for the period 1986–1997, fourteen Portuguese manufacturing industries and panel data econometric techniques. Our most robust finding concerns the relevance of technology spillovers embodied in imports for productivity growth, as long as manufacturing industries employ workers with skills provided by secondary education. The Portuguese manufacturing industry cannot rely on automatic technological catch up for productivity growth so active trade and education policies are crucial to recover from the present bottom position in the rank of OECD productivity levels.