A Human Capital Theory of Growth: New Evidence for an Old Idea

38 Pages Posted: 22 Jun 2014 Last revised: 13 Dec 2014

See all articles by Theodore R. Breton

Theodore R. Breton

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Date Written: January 1, 2014

Abstract

In 1960 Theodore Schultz expounded a human capital theory of economic growth that includes three elements: 1) Countries without much human capital cannot manage physical capital effectively, 2) Economic growth can only proceed if physical capital and human capital rise together, and 3) Human capital is the factor most likely to limit growth. I specify Schultz’s theory mathematically and test it in periods when global financial capital was highly mobile. I find that in 1870, 1910, and 2000, the average schooling attainment of the adult population largely determined the stock of physical capital/capita and GDP/capita in 42 market economies.

Keywords: Human Capital, Schooling, Capital Investment, Economic Growth, Solow Model

JEL Classification: E13, I21, O11, O15, O41

Suggested Citation

Breton, Theodore R., A Human Capital Theory of Growth: New Evidence for an Old Idea (January 1, 2014). Center for Research in Economics and Finance (CIEF), Working Paper No. 14-13, Available at SSRN: https://ssrn.com/abstract=2456903 or http://dx.doi.org/10.2139/ssrn.2456903

Theodore R. Breton (Contact Author)

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Medellin
Colombia

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