Abstract
This study investigated the contributions of human capital and physical capital to economies at different stages by measuring the economic development with the traditional GDP and green GDP. The traditional GDP stood for the quantity of economic growth, and the green GDP, taking both the energy consumption and environmental pollution into account, was employed to represent the sustainability of economic development. We used a panel data of 143 countries and regions during the period from 1990 to 2014, and results showed that the elasticities of output with respect to human capital were greater compared to physical capital, while green GDP was significantly more sensitive to changes in human capital than the traditional GDP. In particular, considering the unbalanced distribution of economic growth among countries and regions, we employed the quantile regression model to explore the heterogeneous roles of physical and human capital in different stages of economic development, which evidenced not only the significance but also the stability of human capital. As national economic levels grew, countries became less dependent on physical capital, yet human capital maintained its outstanding role at different stages of economic development, particularly for the building of more sustainable economies.
Highlights
The significance of human capital and physical capital in economic development has been discussed and evidenced thoroughly in the extant literature
In the fitted model with traditional gross domestic product (GDP) as the dependent variable, the least-squares estimate of the mean output elasticities of physical and human capital were 0.26 and 0.48, respectively, for the entire sample. This means that a percentage increase in the stock of physical capital and human capital significantly brought in 0.26% and 0.48% of growth in the traditional GDP, respectively
This indicates that countries with more rapid economic growth gradually become less sensitive to changes in physical capital, but the impacts of human capital were maintained across countries with various income levels, and in particular, the role of human capital turned out to be more prominent for the building of the green economy of more developed countries and regions
Summary
The significance of human capital and physical capital in economic development has been discussed and evidenced thoroughly in the extant literature. Many countries and regions have invested heavily in education, but the goals assigned to educational development by governments have not always been achieved, especially in developing countries This indicates that the effects of educational investment may vary at different phases of economic growth, and that the heterogeneous impacts are worthy of further empirical scrutiny. With the increasingly intensified trade conflicts as well as weak and uncertain business investment in recent years, coupled with the huge shock of the COVID-19 pandemic, it is widely acknowledged that global economic growth is facing the risk of long-term stagnation. Under such circumstances, we urgently need to identify the roles of human and physical capital so as to understand the fundamental driving force of economic growth
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