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Human Capital And Growth: Theory and Evidence

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  • Paul M. Romer

Abstract

This paper outlines a theoretical framework for thinking about the role of human capital in a model of endogenous growth. The framework pays particular attention to two questions: What are the theoretical differences between intangibles like education and experience on the one hand, and knowledge or science on the other? and How do knowledge and science actually affect production? One implication derived from this framework is that the initial level of a variable like literacy may be important for understanding subsequent growth. This emphasis on the level of an input contrasts with the usual emphasis from growth accounting on rates of change of inputs. The principal empirical finding is that literacy has no additional explanatory power in a cross-country regression of growth rates on investment and other variables, but consistent with the model, the initial level of literacy does help predict the subsequent rate of investment, and indirectly, the rate of growth.

Suggested Citation

  • Paul M. Romer, 1989. "Human Capital And Growth: Theory and Evidence," NBER Working Papers 3173, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3173
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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.
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    6. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 501-526.
    7. Robert E. Hall, 1989. "Invariance Properties of Solow's Productivity Residual," NBER Working Papers 3034, National Bureau of Economic Research, Inc.
    8. Karl Shell, 2010. "A Model of Inventive Activity and Capital Accumulation," Levine's Working Paper Archive 1409, David K. Levine.
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