Abstract:
Despite the crucial role of human capital in the theoretical growth models, the
empirical growth literature has yet to develop a consensus on the nature of relationship
between human capital and economic growth. This study has been conducted to
investigate whether human capital in terms of education and health indicators has a direct
impact on output growth or indirect effect through total factor productivity growth. The
study also attempts to explore the linear as well as non linear human capital-growth
linkages and sensitivity of the human capital estimates to different econometric
estimation techniques. The study has been conducted on a sample of selected countries
covering all developing regions of the world.
Our findings reveal that human capital has a well established role in accelerating
growth through both its ‘level effects’ and ‘rate effects’. The results are not sensitive to
the definition of the education variable. The impact of human capital components on both
output growth and TFP growth are positive regardless of the estimation technique
employed. However, the significance of the coefficients of human capital components
changes with the estimation technique. The parametric models in general do not give
sufficient evidence for non linearity in the human capital-growth relationship. The semi
parametric model, on the other hand, points out the existence of the non linear link, yet it
does not indicate the exact form of the non linear connection.
