Economic growth, human capital and structural change: an empirical analysis

Human capital is identified as one of the main determinants of economic growth and plays an important role in the technological progress of countries. Nevertheless, existing studies have to some extent neglected the importance of human capital on growth via the interaction it can have with a country’s industrial specialization. Additionally, the emphasis is mainly placed on supply-side determinants, being demand-side factors quite neglected, particularly the relevance of the processes of structural change. Thus, using a growth model which integrates variables from both the supply side and demand side, we assess the direct and indirect effects of human capital on economic growth, including in the latter the interaction of human capital with the industrial specialization of countries. Based on econometric panel data estimations involving a set of OCDE countries over 1960-2011, we found that the countries’ productive specialization dynamics is a crucial factor for economic growth. It is also shown that the interaction between human capital and structural change towards high knowledge-intensive industries impacts on the economic growth. However, the sign of this effect depends on the type of country and length of the period of analysis. Specifically, in the long term and in developed countries, where knowledge-intensive industries already account for a great share of the economy, the impact of the interaction between human capital and structural change is positive. In the case of less developed countries, and considering a shorter time period, the effect of human capital via specialization in high-tech and knowledge-intensive activities emerged as negative.