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Issues in Statistical Modelling of Human Capital and Economic Growth Nuxus: A Cross Country Analysis

Author

Listed:
  • Verda Salman
  • Aliya H. Khan
  • Madeeha Gohar Qureshi

    (Pakistan Institute of Development Economics, Islamabad)

Abstract

The human capital and growth relationship has been subject to a lot of debate in economic literature. The empirical growth models are beset with problems ranging from theoretical frameworks and statistical modelling to estimation procedures. Due to non-availability of precise human capital variable, theoretical knowledge fails when pitched against empirical data. This paper is an endeavour to answer four main questions that have prominently figured out in this debate: Is there a direct interplay between human capital and growth or not? Are parametric techniques incapable of capturing nonlinear aspects of human capital-growth relationship as compared to semi parametric techniques? Are estimates of human capital sensitive to proxy of human capital variables? Are estimates of human capital sensitive to estimation techniques? A data of 32 developing countries has been taken as sample for this study. Our findings reveal that human capital has a well established role in accelerating growth through both its ‘level effects’ and ‘rate effects’. The results are not sensitive to definition of education variable but are rather technique dependent. The semi parametric model provides sufficient evidence for non linearity in human capital-growth relationship contrary to parametric models.

Suggested Citation

  • Verda Salman & Aliya H. Khan & Madeeha Gohar Qureshi, 2015. "Issues in Statistical Modelling of Human Capital and Economic Growth Nuxus: A Cross Country Analysis," PIDE-Working Papers 2015:126, Pakistan Institute of Development Economics.
    • Handle: RePEc:pid:wpaper:2015:126
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    References listed on IDEAS

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    Keywords

    Human Capital; Economic Growth; Total Factor Productivity; Semi Parametric;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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