The Relationship between Human Capital and Economic Growth for Selected Countries

Abstract

Sustainable economic growth is common problem for all countries. There are lots of variables affecting the process of economic development and growth. Human capital is considered as one of the most beneficial investment in the economic growth process (Mincer, 1958; Becker, 1960, 1964; Schultz, 1961, 1963). In the late 1980s and early 1990s, interest in human capital begins to evolve on economic growth axis. Many empirical researches have conducted to analyze this hypothesis through various education and health variables as a measure of human capital. However, there isn’t any systematic information on common indicator of human capital in modern economic growth theory. Recently, around the world, the importance of tertiary level education is started to reveal due to progress in technology. But, one of the key questions is that which graduates have a greater impact on growth. So, in this paper, in addition to other indicators, two variables are used to determine the contribution of human capital on growth: the share of graduates from each field over the total tertiary of graduates and dispersion of tertiary graduates by fields. For this purpose, the relationship between human capital composition and economic growth has been analyzed through System GMM method over the 1998-2012 periods for 54 countries. According to our results, graduates of the faculties from agriculture and engineering make the most contribution to growth in developed countries, while graduates of the faculties from health and science make a relatively greater contribution to economic growth in developing countries. Additionally, based on our results, the having human capital from different faculty graduates in both developed and developing countries positively affects economic growth. Also, dispersion of subgroup of tertiary graduates, except engineering, effects the economic growth positively for 28 countries including 27 OECD countries and Bulgaria.