Do higher wages reflect higher productivity?

Norway has invested heavily in education in recent decades. The average educational attainment in Norway was below the OECD average in 1960, while in 1995 Norway was among the OECD countries with the highest average educational attainment 1 . However, growth accounting calculations as documented in Hægeland (1997) show that these investments have contributed relatively little to economic growth. The low estimate for the growth contribution from education is driven by the low wage premiums for education in Norway, and a crucial assumption for such estimates is that relative wages correspond to relative productivity.