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Human Capital and Growth: Specification Matters

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  • Sunde, Uwe
  • Vischer, Thomas

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 aspects 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. Studies that do not account for both channels might underestimate the effect of human capital due to convergence in human capital, in particular when measuring human capital in log average years of schooling. 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," Economics Working Paper Series 1131, University of St. Gallen, School of Economics and Political Science.
  • Handle: RePEc:usg:econwp:2011:31
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    More about this item

    Keywords

    Human Capital; Growth Regressions; Specification.;
    All these keywords.

    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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