The asymmetric impact of human capital on economic growth

Abstract

This paper re-examines the effect of human capital on countries’ economic growth paths. It investigates the significance and the asymmetric impact of human capital stock on economic growth. We apply both a nonparametric and a semiparametric analysis on a sample of 100 countries over the period from 1970 to 2014. We test for nonlinear effects on economic growth for two human capital stock indexes assuming both perfect and imperfect substitutability among skilled and unskilled workers. The empirical findings for both indexes suggest that the effect of human capital on countries’ economic growth levels is positive and statistically significant. We provide robust empirical evidence of a nonlinear relationship among human capital and economic growth levels. However, the revealed asymmetric patterns of human capital are more emphatic under the assumption of perfect substitutability among skilled and unskilled workers.