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The Relationship between Economic Growth and Human Capital in Developing Countries
[journal article]
Abstract
This paper investigates the causal relationship between education and GDP in developing countries by using panel unit root tests and panel cointegration analysis for the period 1970-2010. A three-variable model is formulated with capital formation as the third variable. The results show a strong cau... view more
This paper investigates the causal relationship between education and GDP in developing countries by using panel unit root tests and panel cointegration analysis for the period 1970-2010. A three-variable model is formulated with capital formation as the third variable. The results show a strong causality from investment and economic growth to education in these countries. Yet, education does not have any significant effects on GDP and investment in short- and long-run. It means that it is the capital formation and GDP that drives education in mentioned countries, not vice versa. So the findings of this paper support the point of view that it is higher economic growth that leads to higher education proxy. It seems that as the number of enrollments raise, the quality of the education declines. Moreover, the formal education systems are not market oriented in these countries. This may be the reason why huge educational investments in these developing countries fail to generate higher growth. By promoting practice-oriented training for students particularly in technical disciplines and matching education system to the needs of the labor market, it will help create long-term jobs and improve the country’s future prospects.... view less
Keywords
economic growth; developing country; gross domestic product; research on developing countries; human capital; level of education; capital formation
Classification
National Economy
Basic Research, General Concepts and History of Education and Pedagogics
Free Keywords
Developing Countries; Granger Causality; Human Capital; Panel Cointegration; Panel Unit Root
Document language
English
Publication Year
2013
Page/Pages
p. 55-62
Journal
International Letters of Social and Humanistic Sciences (2013) 5
ISSN
2300-2697
Status
Published Version; peer reviewed