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Human Capital and Growth: Specification Matters

Author

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  • Sunde, Uwe

    () (University of Munich)

  • Vischer, Thomas

    () (University of Munich)

Abstract

This paper suggests that the weak empirical effect of human capital on growth in existing cross-country studies is partly the result of an inappropriate specification that does not account for the different channels through which human capital affects growth. A systematic replication of earlier results from the literature shows that both, initial levels and changes in human capital, have positive growth effects, while in isolation, each channel often appears insignificant. Moreover, the effects are heterogeneous across countries with different levels of development. The results suggest that the effect of human capital is likely to be underestimated in empirical specifications that do not account for both channels. This study therefore complements alternative explanations for the weak growth effects of human capital based on outlier observations and measurement issues.

Suggested Citation

  • Sunde, Uwe & Vischer, Thomas, 2011. "Human Capital and Growth: Specification Matters," IZA Discussion Papers 5991, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5991
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    References listed on IDEAS

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    1. Andrés Erosa & Tatyana Koreshkova & Diego Restuccia, 2010. "How Important Is Human Capital? A Quantitative Theory Assessment of World Income Inequality," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1421-1449.
    2. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741 Elsevier.
    3. Christian Morrisson & Fabrice Murtin, 2009. "The Century of Education," Journal of Human Capital, University of Chicago Press, vol. 3(1), pages 1-42.
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    5. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
    6. Angel de la Fuente & Rafael Doménech, 2006. "Human Capital in Growth Regressions: How Much Difference Does Data Quality Make?," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 1-36, March.
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    8. Daniel Cohen & Marcelo Soto, 2007. "Growth and human capital: good data, good results," Journal of Economic Growth, Springer, vol. 12(1), pages 51-76, March.
    9. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    10. Altinok, Nadir & Murseli, Hatidje, 2007. "International database on human capital quality," Economics Letters, Elsevier, vol. 96(2), pages 237-244, August.
    11. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    12. Philippe Aghion & Peter Howitt & Fabrice Murtin, 2011. "The Relationship Between Health and Growth: When Lucas Meets Nelson-Phelps," Review of Economics and Institutions, Università di Perugia, vol. 2(1).
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    14. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    15. Temple, Jonathan, 1999. "A positive effect of human capital on growth," Economics Letters, Elsevier, vol. 65(1), pages 131-134, October.
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    Cited by:

    1. Belzil, Christian & Hansen, Jörgen & Liu, Xingfei, 2011. "Dynamic Skill Accumulation, Comparative Advantages, Compulsory Schooling, and Earnings," IZA Discussion Papers 6167, Institute for the Study of Labor (IZA).
    2. repec:ibn:ibrjnl:v:10:y:2017:i:12:p:167-182 is not listed on IDEAS
    3. Guarini, Giulio & Porcile, Gabriel, 2016. "Sustainability in a post-Keynesian growth model for an open economy," Ecological Economics, Elsevier, vol. 126(C), pages 14-22.

    More about this item

    Keywords

    specification; growth regressions; human capital;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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