Measurement Error in Education and Growth Regressions*

The use of the perpetual inventory method for the construction of education data per country leads to systematic measurement error. This paper analyzes its effect on growth regressions. We suggest a methodology for correcting this error. The standard attenuation bias suggests that using these corrected data would lead to a higher coefficient. Our regressions reveal the opposite. We discuss why this is the case. Copyright © The editors of the "Scandinavian Journal of Economics" 2010 .