A PANEL REGRESSION ANALYSIS OF HUMAN CAPITAL RELEVANCE IN SELECTED SCANDINAVIAN AND SE EUROPEAN COUNTRIES

The study of human capital relevance to economic growth is becoming increasingly important taking into account its relevance in many of the Sustainable Development Goals proposed by the UN. This paper conducted a panel regression analysis of selected SE European countries and Scandinavian countries using the Granger causality test and pooled panel regression. In order to test the relevance of human capital on economic growth, several human capital proxy variables were identified. Aside from the human capital proxy variables, other explanatory variables were selected using stepwise regression while the dependant variable was GDP. This paper concludes that there are significant structural differences in the economies of the two observed panels. Of the human capital proxy variables observed, for the panel of SE European countries only life expectancy was statistically significant and it had a negative impact on economic growth, while in the panel of Scandinavian countries total public expenditure on education had a statistically significant positive effect on economic growth. Based upon these results and existing studies, this paper concludes that human capital has a far more significant impact on economic growth in more developed economies