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Acemoglu Meets Lucas: Institutions, Human Capital and Economic Growth

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  • Suzana Quinet de Andrade Bastos
  • Fabio Gama
  • Tiana de Paula Assis

Abstract

This paper proposes a reinterpretation of Lucas endogenous growth model (1988), once we add an institutional component as one of its determinants. Firstly, the paper develops a theoretical model that links human capital and institutions. Our modelling strategy establishes the human capital accumulation function as being derived from an endogenous process in which the institutional performance is a booster for the economy¡¯s growth. The essay uses a 40¨Ccountry panel data of the years 2000, 2005 and 2010 and implements a Pooled Ordinary Least Squares (POLS) analysis ¨C alongside instrumental variables (IV) ¨C aiming to validate empirically the model proposed. We verify that Lucas¡¯ model overestimates the human capital contribution as we evaluate the significant impact that economic and political institutions have on the capability of human capital foment growth. Additionally, our estimations also suggest that human capital is, effectively, institutionally driven and works as a channel for the institutions.

Suggested Citation

  • Suzana Quinet de Andrade Bastos & Fabio Gama & Tiana de Paula Assis, 2020. "Acemoglu Meets Lucas: Institutions, Human Capital and Economic Growth," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 11(4), pages 98-114, July.
    • Handle: RePEc:jfr:ijba11:v:11:y:2020:i:4:p:98-114
    DOI: 10.5430/ijba.v11n4p98
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Lee, Jong-Wha & Lee, Hanol, 2016. "Human capital in the long run," Journal of Development Economics, Elsevier, vol. 122(C), pages 147-169.
    3. Gary S. Becker, 1994. "Human Capital Revisited," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, Third Edition, pages 15-28, National Bureau of Economic Research, Inc.
    4. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
    5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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