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The Effect of Increasing Human Capital Investment on Economic Growth and Poverty: A Simulation Exercise

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  • Matthew Collin
  • David N. Weil

Abstract

We examine the dynamic responses of income and poverty to increased investment in the human capital of new cohorts of workers, using a quantitative macroeconomic model with realistic demography. Higher investment leads to significant improvements, although phase-in takes considerable time. Gains are largest in poor countries. We argue in the context of our model that investing in people is more cost effective than investing in physical capital as a means to achieve specified income or poverty goals. We also study the effect of higher human capital on fertility and the follow-on effects of lower fertility on income.

Suggested Citation

  • Matthew Collin & David N. Weil, 2020. "The Effect of Increasing Human Capital Investment on Economic Growth and Poverty: A Simulation Exercise," Journal of Human Capital, University of Chicago Press, vol. 14(1), pages 43-83.
    • Handle: RePEc:ucp:jhucap:doi:10.1086/708195
    DOI: 10.1086/708195
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    Cited by:

    1. Touhami Abdelkhalek & Dorothée Boccanfuso, 2022. "Human Capital Index (HCI) – from uncertainty to robustness of comparisons," Applied Economics, Taylor & Francis Journals, vol. 54(28), pages 3246-3260, June.
    2. Li, Chao & Sun, Daoming, 2023. "Women’s bargaining power and spending on children’s education: Evidence from a natural experiment in China," International Journal of Educational Development, Elsevier, vol. 100(C).
    3. Lv, Yahui & Zhang, Siqi & Li, Hanyue & Wang, Shitong, 2025. "Coupling analysis of rural revitalization and talent development in disadvantaged counties in China," Finance Research Letters, Elsevier, vol. 82(C).
    4. Jacobi, Daniel & King, Elizabeth M. & Montenegro, Claudio & Orazem, Peter, 2025. "Governance, Risks, and Returns to Human Capital," ISU General Staff Papers 202504141344270000, Iowa State University, Department of Economics.
    5. World Bank, 2022. "Timor-Leste Economic Report," World Bank Publications - Reports 37604, The World Bank Group.
    6. Alma Mačiulytė-Šniukienė & Mindaugas Butkus & Renata Macaitienė & Vida Davidavičienė, 2022. "Infrastructure and EU Regional Convergence: What Policy Implications Does Non-Linearity Bring?," Mathematics, MDPI, vol. 11(1), pages 1-22, December.
    7. Alicia Girón & Amirreza Kazemikhasragh, 2022. "Gender Equality and Economic Growth in Asia and Africa: Empirical Analysis of Developing and Least Developed Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(2), pages 1433-1443, June.
    8. Pennings,Steven Michael, 2020. "The Utilization-adjusted Human Capital Index (UHCI)," Policy Research Working Paper Series 9375, The World Bank.
    9. Barbara Dañska-Borsiak, 2023. "Human capital convergence in European NUTS 2 regions," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 18(2), pages 367-392, June.
    10. Natalia P Montoya & Lia C O B Glaz & César C C Abad & Lucas A Pereira & Irineu Loturco, 2020. "What teachers need to know and be able to do: A view from teachers, students, and principals in the Brazilian context," PLOS ONE, Public Library of Science, vol. 15(9), pages 1-12, September.
    11. Jacobi, Daniel & King, Elizabeth M. & Montenegro, Claudio & Orazem, Peter, 2025. "Governance, Risks, and Returns to Human Capital," ISU General Staff Papers 202504141344270000, Iowa State University, Department of Economics.
    12. Amory Gethin, 2023. "Distributional Growth Accounting: Education and the Reduction of Global Poverty," Working Papers halshs-04423765, HAL.
    13. Carlos Mendez & Erick Gonzales, 2021. "Human Capital Constraints, Spatial Dependence, and Regionalization in Bolivia: A Spatial Clustering Approach," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 44(87), pages 115-145.
    14. Yasser Razak Hussain & Pranab Mukhopadhyay, 2023. "How Much do Education, Experience, and Social Networks Impact Earnings in India? A Panel Data Analysis Disaggregated by Class, Gender, Caste and Religion," SAGE Open, , vol. 13(4), pages 21582440231, December.
    15. Nicoleta Valentina Florea & Constantin Aurelian Ionescu & Marinela Daniela Manea & Dan Ioan Topor & Sorinel Capusneanu & Dan Marius Coman & Sorina Geanina Stanescu & Mihaela Denisa Coman, 2023. "Implementing ABC as Cost Management Model for the Human Resources Department: Evidence From a Romanian Entity," SAGE Open, , vol. 13(2), pages 21582440231, May.
    16. Agasisti, Tommaso & Bertoletti, Alice, 2022. "Higher education and economic growth: A longitudinal study of European regions 2000–2017," Socio-Economic Planning Sciences, Elsevier, vol. 81(C).
    17. Rohit, Kumar, 2025. "Global Value Chains and informality in developing economies: GVC participation and extent of informality," Structural Change and Economic Dynamics, Elsevier, vol. 74(C), pages 603-618.
    18. Huang, Chien-Chung & Jin, Huiying & Zhang, Jieyou & Zheng, Qinqin & Chen, Yafan & Cheung, Shannon & Liu, Chuwei, 2020. "The effects of an innovative e-commerce poverty alleviation platform on Chinese rural laborer skills development and family well-being," Children and Youth Services Review, Elsevier, vol. 116(C).
    19. Yahya Fikri & Rhalma Mohamed, 2024. "Impact of Education, Life Expectancy, and Labour Force on Economic Growth: The Case of Morocco," Post-Print hal-04701464, HAL.

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