The Effect of Human Capital on Economic Growth
Date
2011
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Haverford College. Department of Economics
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Thesis
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Award
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eng
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Abstract
This thesis investigates the impact of human capital on economic growth and if it varies depending on a country’s income status. A growth model is created with real per capita gross domestic product (GDP) as the dependent variable and factors of production as physical capital, education, and health. Ancillary variables of international openness and size of public sector are also included in regression analysis. Panel data on 49 countries (17 low-to-lower middle income and 32 upper middle-to-high income countries) is analyzed for the years 1985, 1995, and 2005 using ordinary least squares (OLS) regressions. A one time period lag on the independent variables is used to address the issue of reverse causality. Overall, human capital is found to have a marginally important impact on economic growth. The impact is difficult to distinguish between low-to-lower middle income and upper middle-to-high income countries.