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The role of human assets in economic growth: theory and empirics

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  • Diallo, Ibrahima Amadou

Abstract

In this paper, we introduce a new variable called Human Assets and study its effects on economic growth both theoretically and empirically. The first part builds an endogenous growth model which demonstrates that Human Assets increase economic growth. The second part employs the new Dynamic Common Correlated Effects Estimator for heterogeneous cross-sectionally dependent dynamic panels to empirically study the impact of Human Assets on economic growth. The results corroborate the theoretical predictions that Human Assets act positively on economic growth. The positive impact of Human Assets on growth is maintained when we use small sample bias corrections and sensitivity to the choice of lag orders. The paper also illustrates, theoretically and empirically, that the magnitude of the effect of Human Assets on growth is huge compared to most other determinants of economic growth. Finally, we discover that human capital does not affect the growth rate once we control for Human Assets.

Suggested Citation

  • Diallo, Ibrahima Amadou, 2017. "The role of human assets in economic growth: theory and empirics," MPRA Paper 80402, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:80402
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    File URL: https://mpra.ub.uni-muenchen.de/80402/1/MPRA_paper_80402.pdf
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    References listed on IDEAS

    as
    1. Chudik, Alexander & Mohaddes, Kamiar & Pesaran, M. Hashem & Raissi, Mehdi, 2013. "Debt, inflation and growth robust estimation of long-run effects in dynamic panel data models," Globalization and Monetary Policy Institute Working Paper 162, Federal Reserve Bank of Dallas.
    2. 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.
    3. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    4. Michaël GOUJON & Mathilde CLOSSET & Sosso FEINDOUNO, 2014. "Human Assets Index Retrospective series: 2013 update," Working Papers P110, FERDI.
    5. Bloom, David E. & Canning, David & Sevilla, Jaypee, 2004. "The Effect of Health on Economic Growth: A Production Function Approach," World Development, Elsevier, vol. 32(1), pages 1-13, January.
    6. M. Pesaran, 2015. "Testing Weak Cross-Sectional Dependence in Large Panels," Econometric Reviews, Taylor & Francis Journals, vol. 34(6-10), pages 1089-1117.
    7. Brunner, Martin & Strulik, Holger, 2002. "Solution of perfect foresight saddlepoint problems: a simple method and applications," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 737-753, May.
    8. Jan Ditzen, 2016. "xtdcce: Estimating Dynamic Common Correlated Effects in Stata," SEEC Discussion Papers 1601, Spatial Economics and Econometrics Centre, Heriot Watt University.
    9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    More about this item

    Keywords

    Dynamic Common Correlated Effects Estimator; Heterogeneous Panels; Dynamic Optimization; Endogenous Growth Theory; Human Assets; Undernourishment; Under five mortality; Adult literacy; Secondary Enrolment;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth 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
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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