Abstract
In neo-classical theory, evidences are found that human capital is a progressive contributor of economic growth. However, empirically the relationship may not always hold across the countries. The present study can (1) strengthen the role of human capital in accounting for current scenario (2) reunite the prevailing conditions for economic growth and (3) investigates complementary or substitutionary effects of trade openness, inflation and human capital with institutions on economic growth. The results divulge that human capital alone may not be a significant contributor to economic growth in selected Asian Countries. Institutions reinforce the impact of human capital on economic growth; as they provide necessary conditions to amplify the impact of human capital development. The sufficient condition is the presence of high-quality institutional structure with trade openness and human capital as complementary effect on per capita GDP growth. The impact of inflation (proxy of macro-economic policies) has substitutionary effect with institution.
Similar content being viewed by others
References
Acemoglu, D., Johnson, S., Robinson, J.A.: The colonial origins of comparative development: an empirical investigation. Am. Econ. Rev. 91(5), 1369–1401 (2001)
Acemoglu, D., Cutler, D., Finkelstein, A., Linn, J.: Did medicare induce pharmaceutical innovation? Am. Econ. Rev. 96(2), 103–107 (2006)
Acemoglu, D., Gallego, F.A., Robinson, J.A.: Institutions, human capital and development. Ann. Rev. Econ. 6, 875–912 (2014)
Aghion, P., Howitt, P.: A model of growth. Through creative destruction. Econometrica 60(2), 323–351 (1992)
Aidt, T., Dutta, J., Sena, V.: Governance regimes, corruption and growth: theory and evidence. J. Comp. Econ. 36(2), 195–220 (2008)
Arellano, M., Bond, S.: Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev. Econ. Stud. 58, 277–297 (1991)
Arellano, M., Bover, O.: Another look at instrumental variables estimation of error-component models. J. Econom. 68, 29–51 (1995)
Arrow, K.J.: The economic implications of learning by doing. Rev. Econ. Stud. 29, 155–173 (1962)
Balassa, B.: Exports and economic growth: further evidence. J. Dev. Econ. 5(2), 181–189 (1978)
Banerjee, R.: Population growth and endogenous technological change: Australian economic growth in the long run. Econ. Rec. 88, 214–228 (2012)
Barro, R.J.: Economic growth in a cross section of countries. Q. J. Econ. 106(2), 407–443 (1991)
Barro, R.J.: Determinants of Economic Growth. MIT Press, Cambridge, Mass (1997)
Barro, R.J., Lee, J.W.: International measures of schooling years and schooling quality. Am. Econ. Rev. 86(2), 218–223 (1996)
Barro, R.J., Sala-i-Martin, X.: Technological diffusion, convergence, and growth. J. Econ. Growth 2(1), 1–26 (1997)
Becker, G.S.: Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. University of Chicago Press, Chicago (1964)
Becker, G.S.: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, vol. 1, 3rd edn, pp. 132–133. NBER Books—National Bureau of Economic Research, Inc., Cambridge (1994)
Becker, G.S., Murphy, K., Tamura, R.: Human capital, fertility, and economic growth. J. Polit. Econ. 98(5, pt.2), S12–S 37 (1990)
Becker, G.S., Laeser, E.L., Murphy, K.M.: Population and economic growth. Am. Econ. Rev. 89(2), 145–149 (1999)
Ben-Porath, Y.: The production of human capital and the life cycle of earnings. J. Polit. Econ. 75(4), 352–365 (1967)
Benhabib, J., Spiegel, M.: The role of human capital in economic development: evidence from aggregate cross-country and regional US data. J. Monet. Econ. 34, 143–173 (1994)
Bernard, A., Jones, C.: Productivity and convergence across U.S. states and industries. Empir. Econ. 21, 113–135 (1996)
Bils, M., Klenow, P.J.: Does schooling cause growth? Am. Econ. Rev. 90(5), 1160–1183 (2000)
Bruno, M., Easterly, W.: Inflation crises and long-run growth. J. Monetary Econ. 41(1), 3–26 (1998)
Chang, R., Kaltani, L., Loayza, N.V.: Openness can be good for growth: the role of policy complementarities. J. Dev. Econ. 90, 33–49 (2009)
Chong, A., Gradstein, M.: Inequality and institutions. Rev. Econ. Stat. 89, 454–465 (2007)
Clark, T.E.: Cross-country evidence on long-run growth and inflation. Econ. Inq. 35(1), 70–81 (1997)
Cohen, D., Soto, M.: Growth and human capital: good data, good results. J. Econ. Growth 12(1), 51–76 (2007)
Cooke, D.: Openness and inflation. J. Money Credit Bank. 42, 267–287 (2010)
Delgado, F., Piñón, M., López-Mejía, A., Garza, M: Central America, Panama and the Dominican Republic: challenges following the 2008-09 global crisis (2012)
Din, M., Ghani, E., Siddique, O.: Openness and economic growth in Pakistan. Pak. Dev. Rev. 42(4), 795–807 (2003)
Dollar, D., Kraay, A.: Trade. Growth and poverty. Econ. J. 114, 22–49 (2004)
Domar, E.: Capital expansion, rate of growth, and employment. Econometrica 14(2), 137–147 (1946). https://doi.org/10.2307/1905364
Drury, A.C., Krieckhaus, J., Lusztig, M.: Corruption, democracy, and economic growth. Int. Polit. Sci. Rev. 27(2), 121–136 (2006)
Edwards, S.: Openness, productivity and growth: what do we really know? Econ. J. 108(447), 383–398 (1998)
Farida, M., Ahmadi-Esfahan, F.Z.: Corruption and economic growth in Lebanon. Paper Presented at 52nd Annual Australian Agricultural and Resource Economics Society Conference,Canberra, Australia, February 5–8. Canberra: Australian Agricultural and Resource Economics Society (2008)
Fischer, S.: The role of macroeconomic factors in growth. J. Monetary Econ. 32(3), 485–511 (1993)
Frankel, J.A., Romer, D.: Does trade cause growth? Am. Econ. Rev. 89, 379–399 (1999)
French, E.: The effects of health, wealth, and wages on labour supply and retirement behavior. Rev. Econ. Stud. 72(2), 395–427 (2005)
Freund, C., Bolaky, B.: Trade, regulations, and income. J. Dev. Econ. 87, 309–321 (2008)
Ghosh, A., Philips, S.: Inflation, Disinflation, and Growth, IMF Working Paper (1998)
Gradstein, M.: Inequality, democracy and the protection of property rights. Econ. J. 117(516), 252–269 (2007)
Grossman, G.M., Helpman, E.: Trade, knowledge spillovers, and growth. Eur. Econ. Rev. 35, 517–526 (1991)
Grossman, M.: On the concept of health capital and the demand for health. J. Polit. Econ. 80(2), 223–255 (1972)
Hall, R.E., Jones, C.I.: Why do some countries produce so much more output per worker than others? Q. J. Econ. 114(1), 83–116 (1999)
Hanushek, E.A., Kimko, D.D.: Schooling, labor-force quality, and the growth of nations. Am. Econ. Rev. 90, 1184–1208 (2000)
Heckman, J.: A life cycle model of earnings, learning, and consumption. J. Polit. Econ. 84(4), S11–S44 (1976)
Huang, T., Xie, Z.: Population and economic growth: a simultaneous equation perspective. Appl. Econ. 45, 3820–3826 (2013)
Imai, S., Keane, M.: Intertemporal labor supply and human capital accumulation. Int. Econ. Rev. 45(2), 601–641 (2004)
Iqbal, N., Daly, V.: Rent seeking opportunities and economic growth in transitional economies. Econ. Model. 37, 16–22 (2014)
Jafari Samimi, A., Ghaderi, S., Hosseinzadeh, R., Nademi, Y.: Openness and inflation: new empirical panel data evidence. Econ. Lett. 117, 573–577 (2012)
Klenow, P.J., Rodríguez-Clare, A.: The neoclassical revival in growth economics: has it gone too far? In: Bernanke, B.S., Rotemberg, J.J. (eds.) National Bureau of Economic Research Macroeconomics Annual 1997, vol. 12, pp. 73–114. MIT Press, Cambridge (1997)
Knack, S., Keefer, P.: Instutions and economic performance: cross-country test using alternative institutional measures. Econ. Polit. 7(3), 207–227 (1995)
Levine, R., Renelt, D.: A sensitivity analysis of cross-country growth regressions. Am. Econ. Rev. 82(4), 942–963 (1992)
Lucas, R.E.: On the mechanics of economic development. J. Monet. Econ. 22(1), 3–42 (1988)
Lucas, R.E.: Why doesn’t capital flow from rich to poor countries? Am. Econ. Rev. (Pap. Proc.) 80(2), 92–96 (1990). (Chapter 2 in Lucas 2002.)
Lucas, R.E.: Lectures in Economic Growth. Harvard University Press, Cambridge, MA (2002)
Malthus, T.R.: An Essay on the Principle of Population (Edited and with An Introduction, G. Gilbert). Oxford Press, New York, NY (1993). (Original work published 1798)
Mankiw, N.G., Romer, D., Weil, D.N.: A contribution to the empirics of economic growth. Q. J. Econ. 107(2), 407–437 (1992)
Mann, D.: The President’s Column (NPG-155). Negative Population Growth. Retrieved April 17, 2020, from https://npg.org/library/press-releases/pr-04172020.html (2015)
Méndez, F., Sepúlveda, F.: Corruption, growth and political regimes: cross country evidence. Eur. J. Polit. Econ. 22(1), 82–98 (2006)
Musila, J.W., Yiheyis, Z.: The impact of trade openness on growth: the case of Kenya. J. Policy Model. 37, 342–354 (2015)
Nawaz, S.: Growth Effects of Institutions: A Disaggregated Analysis. COMSATS Institute of Information Technology, Islamabad (2014)
North, D.C.: Structure and Change in Economic History. Norton, New York (1981)
North, D.C.: Institutions, Institutional Change and Economic Performance. Cambridge University Press, Cambridge (1990)
Odularu, G., Alege, P.: Trade Facilitation Capacity Needs: Policy Directions for National and Regional Development in West Africa. Springer, Berlin (2019). https://doi.org/10.1007/978-3-030-05946-0
Olofsdotter, K.: Foreign direct investment, country capabilities and economic growth. Weltwirtschaftliches Arch. 134, 534–547 (1998)
Olson, M.: The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities. Yale University Press, New Haven (1982)
Parente, S.L., Prescott, E.C.: Barriers to Riches. MIT Press, Cambridge, MA (2000)
Polat, A., Shahbaz, M., Rehman, I.U., Satti, S.L.: Revisiting linkages between financial development, trade openness and economic growth in South Africa: fresh evidence from combined cointegration test. Qual. Quant. 49, 785–803 (2015)
Rebelo, S.: Long-run policy analysis and long-run growth. J. Polit. Econ. 99, 500–521 (1991)
Rivera-Batiz, L.A., Romer, P.M.: International trade with endogenous technological change. Eur. Econ. Rev. 35, 971–1001 (1991)
Rodrik, D., Subramanian, A., Trebbi, F.: Institutions rule: the primacy of institutions over geography and integration in economic development. J. Econ. Growth 9(2), 131–165 (2004)
Romer, P.M.: Increasing returns and long-run growth. J. Polit. Econ. 94(5), 1002–1037 (1986)
Romer, P.M.: Endogenous technological change. J. Polit. Econ. 98(5, pt. 2), S71–S102 (1990)
Sachs, J.D., Warner, A., Åslund, A., Fischer, S.: Economic reform and the process of global integration. Brook. Pap. Econ. Act. 26, 1–118 (1995)
Sarel, M.: Nonlinear Effects of Inflation on Economic Growth. IMF Working Papers. 95. 10.2307/3867357 (1995)
Ahmed, S., Rogers, J.: Inflation and the great ratios: long term evidence from the U.S. J. Monetary Econ. 45(1), 3–35 (2000)
Shaw, K.: Life-cycle labor supply with human capital accumulation. Int. Econ. Rev. 30(2), 431–456 (1989)
Sickles, R., Yazbeck, A.: On the dynamics for leisure and the production of health. J. Bus. Econ. Statist. 16(2), 187–197 (1998)
Sirimaneetham, V., Temple, J.: Macroeconomic stability and the distribution of growth rates. World Bank Econ. Rev. 23, 443–479 (2009)
Solow, R.M.: A contribution to the theory of economic growth. Q. J. Econ. 70(1), 65–94 (1956)
Solow, R.M.: Growth Theory: An Exposition, 2nd edn. Oxford University Press, New York (2000)
Strulik, H.: The role of human capital and population growth in R&D-based models of economic growth. Rev. Int. Econ. 13, 129–145 (2005)
Sunde, U., Vischer, T.: Human capital and growth: specification matters. Economica 82(326), 368–390 (2015)
Tyler, W.G.: Growth and export expansion in developing countries: some empirical evidence. J. Dev. Econ. 9(1), 121–130 (1981)
Ulaşan, B.: Trade openness and economic growth: panel evidence. Appl. Econ. Lett. 22, 163–167 (2015)
Valeriani, E., Peluso, S.: the impact of institutional quality on economic growth and development: an empirical study. J. Knowl. Manag. Econ. Inf. Technol. 1(6), 274–299 (2011)
Vlastou, I.: Forcing Africa to open up to trade: is it worth it? J. Dev. Areas 44, 25–39 (2010)
Warsh, D.: Knowledge and the Wealth of Nations. W. W. Norton & Company, New York (2006)
World Bank: World development report 2019: the changing nature of work. Build. Hum. Cap. (2019). https://doi.org/10.1596/978-1-4648-1328-3_ch3
Yao, W., Kinugasa, T., Hamori, S.: An empirical analysis of the relationship between economic development and population growth in China. Appl. Econ. 45, 4651–4661 (2013)
Young, A.: Learning by doing and the dynamic effects of international trade. Q. J. Econ. 106, 369–406 (1991)
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Aslam, A. The hotly debate of human capital and economic growth: why institutions may matter?. Qual Quant 54, 1351–1362 (2020). https://doi.org/10.1007/s11135-020-00989-5
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11135-020-00989-5