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The recent concern on reviving relationship between educationand labor markets is deeply rooted in the recent interest of human capitaltheory. One of the most typical treatments of such relationship is the linkbetween the level of education and the level of earnings in labor markets.Under the human capital theory, the earnings are determined by the individual?sstock of human capital. This capital may be increased by investment ineducation, health, or training. The conference on Enhancing Links BetweenEducation and Labor Markets in Arab Countries is related to the first type ofinvestment.
Since education plays a substantial role in accumulating humancapital, and consequently economic growth, the literature on this role isimmense. Unlike investment in physical capital, investment in human capital isaffected not only by increase in stock, but by transfer of the existing stockfrom one generation to another (Salehi, Isfahani, 2001).
One of the well-known contributions in this regard, is the workof G. Psacharopoulous, where 29 developing countries were included. The studyrevealed that the contribution of education in economic growth ranges from 1%in Mexicoto 23% in Ghanain the early 1980s (Psacharopoulous, 1984). On the contrary, L. Pritchettreported a negative relationship between education and economic growth based ondata of 91 countries. He attributed this result to (a) schools do not help inaccumulation of human capital; (b) marginal returns on education tend todecline remarkably when the demand on educated labor is constant; and (c)institutional environment does not allocate educated labor to growth-enhancingactivities (Pritchett, 1999).
On the other hand, where cross sectional analysis for 58 countries showed anegative relationship between education and economic growth in the Africanregion, Middle East and North Africa, insignificant relationship was found in the case of Latin America and South Asia,and a positive and significant relationship in East Asiaregion (Lawrence, Jamison, and Louat, 1991).