Does human capital contribute to economic growth in Mauritius?

Abstract

Purpose Real gross domestic product (GDP) growth for Mauritius has averaged more than 5 per cent since 1970 and GDP per capita has increased more than tenfold between 1970 and 2012, from less than $500 to more than $9,000. It has often been reported that human capital, along with other growth enablers, has played an important role in this development. The purpose of this paper is to study this nexus. Design/methodology/approach A human capital augmented Cobb-Douglas production function is used, where output is also a function of capital and labour. One of the innovations of the present paper is the use of a composite index to proxy human capital. The authors investigate the impact of human capital on economic growth in a dynamic vector error correction modelling (VECM) framework. Findings The general results here show that stock, labour and human capital are all significant growth determinants, with human capital having a long-run output elasticity of 0.36. The VECM results generally validated the long-run output elasticity, although a relatively lower elasticity of 0.1 is obtained. Both sets of results tend to point to the fact that human capital has significantly contributed to economic growth in Mauritius. Research limitations/implications The current paper paves the way for future work, which can build on the composite HCI developed here and aggregate it with relevant variables representing tertiary education and training, to better analyze and further understand the role of human capital on economic growth in Mauritius. Originality/value Here, the authors posit that human capital is an aggregate of health, education and nutrition, and the authors use a composite index along with other contributing factors to study its impact on economic growth, within a VECM framework.