Human capital Development and Economic Growth: A cross country study

The study examined the impact of human capital development on economic growth for 129 countries comprising of developed and developing countries. The primary focus of the study is on examining the contribution of human capital index components on economic growth for the period 2014 to 2017. The panel data model was employed in the study. Firstly, the hausman test was used to determine the suitable method between fixed and random effects. The fixed effects model was selected as the best panel econometric technique to be used in the study. The empirical results showed that there is a positive and statistically significant relationship between human capital index components (capacity, development, deployment and know how) and economic growth. The study also found that these components of human capital index have more impact on economic growth when they are interacted together based on theories of human capital and economic growth. Capacity and development are found to be the best contributors to economic growth for all the regions; thus, the study recommends that for economic growth to be increased, countries should invest more of their funds on capacity and development sub- indexes of human capital index. Exchange rates and inflation are found to have a negative relationship with the economic growth, while interest rates are found to have a positive and statistical relationship with the economic growth. The study also found out that there is a regional effect associated with human capital development, with European region being the best contributor to GDP. The components of human capital index also found to be important for all regions to invest on to improve economic performance. Deployment is found not to be significant is Sub-Saharan Africa. The existence of income group effect is found with developed countries performing much better compared to developing countries. The study also recommended that countries should invest more of their wealth in human capital development components such as education and health to enhance their economic growt