Relationship between Human Skills and Economic Growth

economic growth and human skill

In the late 20th century, economists have attempted to explain the differences in economic growth rates around the world. Barro (1991) and hundreds of economists pursued the question of what factors determined the substantial observed differences in economic growth.

They tested a variety of economic and political explanations, although the modeling invariably incorporated some measure of human capital.

For 98 countries in the period, 1960–1985, the growth rate of real per capita GDP is positively related to initial human capital (proxied by 1960 school-enrollment rates) – Robert J Barro (1991)

However, many other economists critique the use of school enrollment rates as a measure of human capital. Simple school attainment does not measure skills; and access to schools, alone, turns out to be an incomplete and ineffective goal for development. You can enroll the whole country into school, but if quality education is not offered, then the human capital may not improve the economic growth.

In 2013, Hanushek explained that the focus on universal school attainment which supports the campaigns of Education for All is very important. However, it does not put the developing countries in a good position for growth. The authors also note that data on improvements in school attainment has been impressive, but the very large gaps in achievement lead to different interpretations of the progress.

Nonetheless, there are empirical analyses which show us that economic growth is directly and significantly related to the skills of the population. The key issue is measuring the skills correctly.

In their work, (Hanushek and Woessmann, 2015) concluded that a population’s knowledge capital, or collective cognitive skills, is by far the most important determinant of a country’s economic growth. They presented this relationship through the marginal impact of knowledge capital and long-run growth on a graph.

economic growth

Countries align closely along the regression line that depicts the positive association between cognitive skills and economic growth.

Conclusion

If the developing countries aim to attain economic growth through human capital, then emphasis should make on both increase school attainments as well as quality education. Governments should also introduce policies that will reduce migration among the skilled and experienced experts. Many people have acquired skills in developing countries but later migrate to countries like Canada, Australia, Europe, and the USA.

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