The Importance of Human Capital for Economic Growth

Abstract

Recent theoretical contributions to the growth literature emphasize the role of human capital in the process of economic growth. Meanwhile, the empirical literature on the link between human capital and growth has changed course several times over the last decade. On balance, the evidence now seems to indicate that educational expansion does contribute to output growth. There also appear to be grounds for thinking that human capital has a substantial impact on technological catch-up, possibly through improving a country's capacity to adopt new technologies. However, the literature is subject to many methodological and conceptual weaknesses, such as the inadequacy of empirical human capital proxies and reverse causality. Therefore, these conclusions have to be considered preliminary and fragile.