Diagnosing Human Capital as a Binding Constraint to Growth

The empirical literature on the contributions of human capital investments to economic growth shows mixed results. While evidence from OECD countries demonstrates that human capital accumulation is associated with growth accelerations, the substantial efforts of developing countries to improve access to and quality of education, as a means for skill accumulation, did not translate into higher income per capita. In this Element, we propose a framework, building on the principles of 'growth diagnostics', to enable practitioners to determine whether human capital investments are a priority for a country's growth strategy. We then discuss and exemplify different tests to diagnose human capital in a place, drawing on the Harvard Growth Lab's experience in different development context, and discuss various policy options to address skill shortages.

Revisiting the Marshmallow Test: On the Interpretation of Replication Results

In a recent paper, Watts, Duncan and Quan (2018; henceforth WDQ) replicate and extend the famous marshmallow studies. Their paper seemingly challenges the original evidence. We acknowledge WDQs contribution, but raise two concerns regarding WDQ’s findings and their interpretation. First, differences in measures between the two studies preclude a direct comparison of results. Most importantly, Monte Carlo Simulations indicate that the correlations reported in WDQ are biased towards zero due to censoring in the length of feasible waiting times. Second, a reduction in correlation size and significance in the presence of covariates which are not entirely exogenous or predetermined is difficult to interpret. We conclude that WDQ’s findings cannot serve to refute the evidence reported by Mischel and Shoda and suggest that assessing the importance of delay of gratification for later life outcomes ultimately requires more refined models of the skill accumulation process as well as targeted intervention studies.