An empirical study of human capital on economic growth: An investigation using three indices of human capital

This research reexamines the augmented Solow’s growth model to find the relationship between human capital and economic growth by using three different proxies for human capital. The first proxy of human capital is the proportion of labor force with secondary education that has been widely used in many studies. PISA score is the second proxy to human capital. It is regarded as being quality of education because this standardized test score could directly reflect the cognitive ability of individuals. The third proxy is the human capital index constructed by Penn’s World Table 9.0 that included both quantitative and qualitative aspects of human capital. The study also includes physical capital into the estimation of economic growth. The equilibrium growth model was firstly estimated based on the cross-section data of 21 middle-income countries and 36 high-income countries from 2010 to 2016. An alternative approach of estimation is the panel fixed effects model of 46 countries from 2010 to 2013 to allow different country-specific effects. Consistently with most studies, our result indicated that both physical capital and human capital are crucial factors to drive economic growth. The study found that human capital has played a positive role in economic growth in all proxies. However, it has been found that the most significant proxy is an index from Penn’s. An important implication of the findings is to confirm that human capital indicator should not only deal with a number of highly educated workers but it should also cover features in labor productivity improvement in an economy.