The Effect of Demographics and Human Capital Formation on Economic Growth in BRICS and MINTs

Abstract

The developing economies of the BRICS and MINTs have achieved significant economic growth rates and have been growing relatively at the expense of the advanced economies, reflecting their growing importance in the globalizing world economy. This study examines how they were able to distinguish themselves among other developing economies and are in the process of becoming developed economies. The research is conducted by doing a cross-country analysis between them and 35 advanced economies for the period 1992-2013 using OLS estimation method and takes the growth determinants of the human capital augmented Solow model as its basis. The result is that in addition to the amount of capital per worker, population growth rate and initial GDP per capita, human capital formation through the demographic age structure of the population does have a significant effect on economic growth depending on the age group. A one percentage point increase in the population younger than 15 results in a 0.400 percentage point increase in the GDP per capita growth rate, ceteris paribus. Similarly a middle-old aged workforce and ageing population has negative effects. In order to optimally benefit from their young workforce BRICS and MINTs need to invest in a higher educated, healthier and more participant workforce.