Human Capital and Growth Empirics

Abstract

In this paper I attempt to understand the empirics of human capital (schooling attainment here) and economic growth under the framework of neoclassical growth model and later endogenizing the technological progress as a function of stock value of human capital. Various econometric methodologies have been used to overcome estimation problems involved here - such as omitted variable bias, endogeneity of independent variables, and weak instruments problem. I used panel data method, Difference GMM method, and System GMM method respectively to overcome the above problems. In all the above estimation methodologies, the positive and significant effect of human capital is not observed. The paper concludes with the observations that significance of human capital may be understated, because of (i) inappropriate specification of human capital production function, (ii) inappropriate estimation methodologies, (iii) not controlling for variables related to governance, institutions, etc. Hence further research works on these points may help in appropriately estimating the significance of human capital in growth empirics.