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The role of human assets in economic growth: theory and empirics

Diallo, Ibrahima Amadou (2017): The role of human assets in economic growth: theory and empirics.

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In this paper, we introduce a new variable called Human Assets and study its effects on economic growth both theoretically and empirically. The first part builds an endogenous growth model which demonstrates that Human Assets increase economic growth. The second part employs the new Dynamic Common Correlated Effects Estimator for heterogeneous cross-sectionally dependent dynamic panels to empirically study the impact of Human Assets on economic growth. The results corroborate the theoretical predictions that Human Assets act positively on economic growth. The positive impact of Human Assets on growth is maintained when we use small sample bias corrections and sensitivity to the choice of lag orders. The paper also illustrates, theoretically and empirically, that the magnitude of the effect of Human Assets on growth is huge compared to most other determinants of economic growth. Finally, we discover that human capital does not affect the growth rate once we control for Human Assets.

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