Post-Secondary Schooling Quality and Manufacturing Capacity in Africa

Abstract

Quality investment in post-secondary schooling could facilitate structural transformation of African economies presently dominated by small-scale agricultural activities. To probe the causal relationship between human capital quality and manufacturing capacity, we build a new database of schooling quality. The country-level average test score of students in the GMAT examinations between 1984 and 2006 is used as the main measure of post-secondary schooling quality. Our OLS results suggest a strong and positive relationship between schooling quality and manufacturing capacity. Our results are robust to the addition of a fairly large number of relevant variables, corrections for influential observations and check for self-selection related biases. Furthermore, we use 2SLS technique to correct for possible endogeneity, omitted variable bias and measurement error of the schooling quality indicator. Our instrument passed the tests of exogeneity, although the maximum likelihood technique is used due to weak instrument problem