Interrelationships Between Human Capital And Intellectual Capital: Evidence From The Panel Of High-Income And Low And Middle-Income Groups Of The World

The competitiveness in production sector is increasing significantly due to the openness of the economies in the world. Importance of intellectual capital (IC) thus has been mounting continuously and human capital formation (HCF) is considered as the main source of it. IC, an advanced version of human capital, is formed by the efforts upon research and development (RD) activities. It is a natural question whether HCF helps in the formation of intellectual capital in the countries of different status. Under the backdrop, the study examines the long-term relationship between intellectual capital and HCF in case of some countries from the high-income group (HIG) and low and middle-income group (LMIG) during the period of 1998 to 2018. It employs panel unit root, panel cointegration and panel causality techniques for examining the long run associations and short run dynamics between human capital and intellectual capital for the two groups of the economies. The findings of the study show that long-term association exists between these two forms of capital for both the panels of high and low and middle-income nations. But the short-run causal interplay works in high-income group only where human capital formation is making a cause to the intellectual capital formation. A one-unit increase in the change of HCF at period t-1 results in a 0.05 unit rise in the change of current year intellectual capital in the high-income group. The governments of the countries are suggested to make more human capital formation via increasing expenditures on both education and health sector to assure more intellectual capital.