The Impact of Human Capital on Economic Growth: A Panel Data Study on OECD Countries

Abstract

This study will make a significant contribution to the literature by demonstrating that human capital can be a key strategy for boosting economic development. The results of the analysis were based on data from thirty-six (36) countries of the Organization for Economic Co-operation and Development (OECD). This research analyzed the effect of human capital on economic growth in OECD countries, using data from 1990 to 2017 for thirty-six (36) OECD countries. For these purposes, the balanced panel data of variables like GDP per capita, human capital index, inflation rate, trade, and population growth rate were taken from the year of 1990 to 2017. The Pedroni and Kao residual co-integration test results have verified the existence of a long-run association between the variables. By agreeing Panel Autoregressive Distributed Model, the output showed the link between human capital with economic growth in the long run, ARDL. Moreover, inflation rate, trade, and population growth rate were found as the supporting indicators of economic growth in the long run. Specific policies for each country, therefore, were difficult to develop. Future studies can explore the impact for individual country of human capital on economic growth. The study suggested that there was a need to focus more on human capital for high economic growth in OECD countries.