The Contribution of Human Capital to Current and Future Growth : An Extension of the World Bank’s Long-Term Growth Model (LTGM-HC)

This paper presents the Long-Term Growth Model–Human Capital Extension (LTGM-HC), a spreadsheet-based toolkit that projects the human capital of the workforce from 2025 to 2100 for 153 countries. The LTGM-HC simulates pre-tertiary years of schooling, education quality, and health across age cohorts and how they affect current and future workforce productivity. The paper also produces three sets of general results. First, it provides new estimates of the current rate of human capital growth, which differ substantially from those in the Penn World Tables. Global average human capital growth is almost 1 percent and is surprisingly similar across income groups, as greater historical gains in years of schooling in poorer countries are offset by lower initial school quality. Second, it provides new estimates of the pace of future human capital growth. Without future reforms, average human capital growth will slow by around 0.15-0.2 percentage points per decade, hitting zero by 2080 when today’s children begin to retire. In contrast, a scenario with a typical pace of reform almost halves the rate of decline. Finally, it provides new estimates of the contribution of human capital to current and future economic growth. In a typical reform scenario, human capital growth is projected to raise annual GDP per capita growth by around half a percentage point over the next 75 years, leaving GDP per capita 45 percent higher by 2100. However, about two-thirds of these gains reflect reforms that have already been enacted. An extension to include tertiary education raises human capital growth, and its contribution to GDP growth, by around 0.1-0.2 percentage points.