The Contribution of Human Capital to Economic Grwoth: Evidence from Low, Middle and High Income Countries

• Main Authors: Shou-chun Yu, 余守純
• Other Authors: Wen-jen Hsieh
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/47267447696846812482

碩士 === 國立成功大學 === 政治經濟學研究所 === 95 === This paper intends to analyze the contribution of human capital to the economic growth. In a word, human capital means the healthy labors which are skilled, educated or have accepted on-the-job-training and they are different from the raw labors. Human capital not only puts emphasis on the quantity of labor force but also on the quality. Hence, in this research, two variables are used as a proxy for human capital. The first is education, which is defined as the enrollment rates of primary, secondary or tertiary education. The second proxy for human capital is health, expressed as the shortfall of life expectancy relative to a nominal benchmark or the ratio of public health expenditures to GDP. Due to the limitation of data on, in terms of both coverage of countries and length of time series, the empirical work reported here uses for 17 low- income countries, 41 middle-income countries and 24 high-income countries (three external groups). Furthermore, the 41 middle-income countries can be divided into two groups: 22 lower-middle-income countries and 19 upper-middle-income countries (two internal groups). Therefore, we use the three external and two internal groups to probe into the impact of human capital on economic growth. With the coming knowledge economy age, we want to know whether human capital plays an important role for both of the external and internal groups or possesses importance at different levels for them because of the distinct economic structures from each other. To begin, the paper applies F test to investigate the heterogeneity which certainly exists among the sample data. Therefore, we often use either fixed effect model or random effect model to perform the empirical work. After Hausman test has been performed, the fixed effect model has been chosen. And the period under study for the explained variable, which is defined as labor income per capita, is from the year 2000 to 2004; however, the independent variables are from the year 1998 to 2002 in order to avoid Granger causality and data incompleteness. In addition, the first-order autocorrelation (AR(1)) and the cross section seemingly unrelated regression (SUR) are employed to mitigate the problems of serial correlation and heteroskedasticity, which may exist among variables. The econometric results suggest that: (1) for the low-income country group, investing in physical capital and human capital are of equal importance to the government; furthermore, in the human capital, policies to increase economic growth should favor investments in education (especially primary and secondary education) over health; (2) for the middle, lower-middle and upper-middle income country groups, the governments should pay more attention to invest in human capital than in physical capital. And in the human capital, the governments must put emphasis on education and health simultaneously; (3) for the high-income country group, the government should place importance on physical capital and human capital at the same time. As for human capital, specific policies to stimulate economic growth should prefer investments in tertiary education and raise life expectancy at birth. Consequently, the differences of economic structures among the low, middle and high-income country (external) groups certainly cause them to place importance on human capital at different levels. However, for the middle, lower-middle and upper-middle income country (internal) groups, the prerequisite to increase economic growth is investments in human capital (both of education and health). In other words, differences of the economic structures within the internal groups do not lead them to the diverse results.