Economics of Education Review 21 (2002) 513–521 www.elsevier.com/locate/econedurev Growth and educational levels: a comparative analysis P.E. Petrakis a,* , D. Stamatakis 1,b a Athens Kapodistrian University, Stadiou 5, Suite 106, Athens 10562, Greece b Athens Kapodistrian University, Stadiou 5, Suite 308, Athens 10562, Greece Received 6 December 1998; accepted 21 May 2001 Abstract This article investigates the effect of human capital on growth in three groups of countries that exhibit significantly different levels of development. The empirical work attempts to uncover differences between OECD developed market economies and less developed countries to show that each educational level contributes to growth among countries of different development levels. The empirical findings of the cross-country data sets suggest that the link between growth and education varies as a result of different levels of economic development. They also suggest that the role of primary and secondary education seems to be more important in LDC nations, while growth in OECD economies depends mainly on higher education.  2002 Elsevier Science Ltd. All rights reserved. JEL classification: 011; 047; 053; 120 Keywords: Human capital; Educational levels; Growth; Level of development 1. Introduction The present study constitutes an empirical attempt to link economic growth with investment in human capital, by detecting differences in the way that level-specific educational investment contributes to growth. It investi- gates and compares three cross-country groups of sig- nificantly different development: less developed, developed and advanced. The newly developed and advanced groups pertain to OECD countries, while the less developed group corresponds to poor nations outside the OECD. The empirical section of this study utilizes the new endogenous growth theory by projecting a corre- sponding stochastic model for three alternative country groups, one for each development category, and compar- * Corresponding author. Tel.: +30-11-301-3689353; fax: +30-11-301-3689352. E-mail addresses: ppetrak@cc.uoa.gr (P.E. Petrakis), stamatd@hotmail.com (D. Stamatakis). 1 Tel.: +30-11-301-3689359; fax: +30-11-301-3689352 0272-7757/02/$ - see front matter  2002 Elsevier Science Ltd. All rights reserved. PII:S0272-7757(01)00050-4 ing the coefficients of each educational level among the different development categories. 2. Prior research In recent times, education has been recognized as a very important growth factor. Alderman, Behrman, Ross, and Sabot (1996) claimed that developing countries invest over $100 billion per year on education and other human capital investments such as health. Consequently, understanding how these investments contribute to growth becomes a very important factor in understanding growth trends and growth differences in a worldwide context. A wealth of theoretical contributions by, among others, Lucas (1988), Becker, Murphy, and Tomura (1990), Mulligan and Sala-i-Martin (1992) and Mank- iew, Romer, and Weil (1992), have provided a concep- tual framework that links education and growth. Psacharopoulos (1989, 1994), Mincer (1988), Cohn and Geske (1990), Cohn and Addison (1998) and others have concentrated their efforts in the alternative direction