Ireland achieved almost universal literacy and a high general standard of education at an early stage of its development, through the provision of low-cost instruction, with an emphasis on traditional `liberal' subjects and substantial voluntary inputs from religious personnel. Despite recurrent concern about the excessively `academic' slant of the education system, its contribution to economic development received little explicit attention from policy-makers until the 1960s. Political pressures to increase access to education among the poorer social classes and prompting from the OECD led to a significant increase in resources devoted to education during the 1960s and 1970s, however, so Ireland in the 1960s provides an example of a high stock of human capital associated with a low level of per capita income. The level of physical capital formation also rose sharply in the 1970s, which should have further raised a relatively high growth rate, but there is little evidence of catch-up with the richer OECD countries.

In Discussion Paper No. 819, Research Associate Brendan Walsh examines some possible explanations. He finds no evidence of bias in the structure of the outflow from the educational system in favour of rent-seeking as distinct from productive activities. Nor do low rates of return to additional years of schooling account for this poor record of growth. Rather, direct or indirect government control of a large proportion of physical investment, which is financed by external government borrowing, may account for its low productivity. Ireland's exceptionally high and volatile rate of net external migration has also impeded its ability to reap the returns on its substantial investment in human capital.

The Contribution of Human Capital Formation to Post-War Economic Growth in Ireland
Brendan Walsh

Discussion Paper No. 819, July 1993 (HR)