Human capital accumulation, long-run GDP growth and technological frontier

While initial education is at the heart of growth models, less work has been done on the influence of human capital accumulation on long-run growth. Our first step was to overcome the "human capital puzzle" by the introduction of the technological frontier as defined by Vandenbusshe, Aghion and Meghir (2006). The "human capital puzzle" means that the level of human capital has a significant positive effect on growth in countries where educational attainment is low and a significant negative effect in countries where educational attainment is high. We specified an aggregate long-run growth equation while taking account the limitations of the various approaches but without rejecting the contribution of endogenous theories. By combining the distance to technological frontier and the workhorse cross-country regression model, our coefficient on both the level and rate of accumulation of human capital are positive, and significant at the 1 and 10 percent level for the human capital predictors alone, and that the interaction between the rate of accumulation of human capital and distance to the technological frontier is also significant at the 5 percent level. This shows that the distance to the technological frontier significantly affects the relationship between human capital accumulation and economic growth, while cross-country differences in technology do not change the relationship between initial level of human capital stock and economic growth. Moreover, the effects of human capital accumulation on economic growth tend to increase with technological advancements of countries. According to oure conometric results, the "human capital puzzle" is thus partially solved by taking into account cross-country differences in technological advancements, and their interaction with human capital proxies. To address th eendogeneity of the human capital variable, we turn toward a simultaneous equations mode (SEM) where accumulation of human capital is also caused by economic growth, and where accumulation of physical capital is allowed to be endogenous. Despite a less complete dataset(fewercountries), the both human capital level and accumulation have a positive and significant effect on long-term growth of GDP per capita. These first results were needed before investigating the relationship between human capital and economic development at a more granular level and could help to not underestimate the spillover effect of the investment in human capital accumulation on long-run GDP growth especially incountries close to the technological frontier