Early human capital: the driving force to economic growth in island economies

Abstract

PurposeThe paper investigates into the human capital–economic growth nexus by arguing that investment in early education and health helps in achieving higher economic growth. Early investment in human capital matters most for economic growth than the increase in human capital over the years.Design/methodology/approachA dynamic vector error correction model (VECM) together with the impulse response function and variance decomposition are used on data for Mauritius from 1983 to 2019. The paper distinguishes between the short-run and the long-run effects of human capital measured by the pupil–teacher ratio in pre-primary education and life expectancy at birth.FindingsThis study’s findings reveal that investment in early education and health has contributed positively to growth performance. There is evidence for long-run growth effects arising from a positive shock in the education and health indicators.Originality/valueThis paper contributes to both the theoretical and empirical literature on the human capital–growth nexus. Mauritius as a natural resource poor small economy is an important case study as it has started early in investing in its people to promote economic growth.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2021-0674.