Exploring the linkage between human capital and economic growth: A look at 141 developing and developed countries

As a factor of production, human capital is defined both in its health and educational dimensions, incorporating qualitative and quantitative aspects. Using a panel of 141 countries (93 developing and 48 developed), we attempt to explore and compare the impact of human capital on economic growth at different development stages. For our estimation, we employ the System Generalized Methods of Moments (SGMM) for the period 1980–2008. Our findings reveal that all aspects of human capital positively influence growth in developing countries, especially life expectancy gain, which may be explained by the demographic transition these countries are going through. However, the scenario is different for developed countries, where increased life expectancy posits a drag on economic growth, probably because of the increasingly aging population and dependency ratio. Only when life expectancy is omitted does health expenditure, along with other educational measures of human capital, help sustain growth in developed countries.