Human Capital, Capital Stock Formation, and Economic Growth: A Panel Granger Causality Analysis

Abstract

Fostering educational practices, increasing enrollments rate, and improving learning is a central part of most economic development strategies. Most economists from the 20th and early 21st century see the idea of increasing the public’s aggregate per capita investment in human capital as a controversial topic; because the expansion of education has not guaranteed improved economic conditions in some regions. The variables used in the study include 14 Latin American countries that have been analyzed, and the results show a strong causal relationship between real gross domestic product per capita–purchasing power parity and human capital. Although the study doesn’t find a direct Granger causal relationship moving from human capital to real gross domestic product per capita-purchasing power parity, there is an indirect Granger causal relationship between our variables of interest. The association can be found in the bidirectional Granger causal relationship between human capital and trade balance.