Impact of human capital development on productivity growth in EU member states
Abstract
In this research, we investigate the impact of human capital on labour productivity in European Union member states using panel data analysis. Results of the paper are estimated using the Pooled ordinary least squares (OLS) and Fixed effects model (FEM). The results show that human capital is positively significant in improving the growth of labour productivity in the EU. Our estimates also suggest that the impact occurs after three times lags in case of education expenditure.
Keyword : human capital, productivity, health care expenditure, education expenditure
How to Cite
Mačiulytė-Šniukienė, A., & Matuzevičiūtė, K. (2018). Impact of human capital development on productivity growth in EU member states. Business, Management and Economics Engineering, 16, 1-12. https://doi.org/10.3846/bme.2018.66
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Annabi, N. (2017). Investments in education: what are the productivity gains?. Journal of Policy Modeling, 39, 499-518. https://doi.org/10.1016/j.jpolmod.2017.03.003
Annabi, N., Harvey, S., & Lan, Y. (2011). Public expenditure on education, human capital and growth in Canada: an OLG model analysis. Journal of Policy Modeling, 33, 852-865. https://doi.org/10.1016/j.jpolmod.2011.08.020
Appleton, S., Hoddinoti, J., & MacKinnon, J. (1996). Education and health in sub-Sahara Africa. Journal of International Development, 8(13), 307-339. https://doi.org/10.1002/(SICI)1099-1328(199605)8:3<307::AID-JID394>3.0.CO;2-D
Arshad, M. N., & Ab Malik, Z. (2015). Quality of human capital and labor productivity: a case of Malaysia. International Journal of Economics, Management and Accounting, 23(1), 37-55.
Asteriou, D. (2009). Foreign aid and economic growth: new evidence from a panel data approach for five South Asian countries. Journal of Policy Modeling, 31(1), 155-161. https://doi.org/10.1016/j.jpolmod.2008.04.012
Backman, M. (2014). Human capital in firms and regions: impact on firm productivity. Papers in Regional Science, 93(3), 557-575. https://doi.org/10.1111/pirs.12005
Bartel, A. P. (1995). Training, wage growth, and job performance: evidence from a company data-base. Journal of Labor Economics, 13(3), 401-425. https://doi.org/10.1086/298380
Becker, G. S. (2007). Health as human capital: synthesis and extensions. Oxford Economic Papers, 59(3), 379-410. https://doi.org/10.1093/oep/gpm020
Belorgey, N., Lecat, R., & Maury, T. P. (2006). Determinants of productivity per employee: an empirical estimation using panel data. Economics Letters, 91(2), 153-157. https://doi.org/10.1016/j.econlet.2005.09.003
Benos, N., & Karagiannis, S. (2016). Do education quality and spillovers matter? Evidence on human capital and productivity in Greece. Economic Modelling, 54, 563-573. https://doi.org/10.1016/j.econmod.2016.01.015
Black, S. E., & Lynch, L. M. (1996). Human-capital investments and productivity. AEA Papers and Proceedings, 86(2), 263-267. Harvard University, Cambridge.
Bloom, D. E., Canning, D., & Sevilla, J. (2004). The effect of health on economic growth: a production function approach. World development, 32(1), 1-13. https://doi.org/10.1016/j.worlddev.2003.07.002
Burger, R. P., & Teal, F. J. (2014). The effect of schooling on worker productivity: evidence from a South African Industry panel. CSAE Working Paper WPS/2014–10.
Chang, C. F., Wang, P., & Liu, J. T. (2016). Knowledge spillovers, human capital and productivity. Journal of Macroeconomics, 47, 214-232. https://doi.org/10.1016/j.jmacro.2015.11.003
Chani, M. I. & Shahid, M. (2012). Human capital formation and economic development in Pakistan: an empirical analysis. Aktual’nі problemi ekonomіki, (6), 486-495.
Chansarn, S. (2010). Labor productivity growth, education, health and technological progress: a cross-country analysis. Economic Analysis and Policy, 40(2), 249-261. https://doi.org/10.1016/S0313-5926(10)50027-4
de la Escosura, L. P., & Rosés, J. R. (2010). Human capital and economic growth in Spain, 1850–2000. Explorations in Economic History, 47(4), 520-532. https://doi.org/10.1016/j.eeh.2010.02.002
Delsen, L., & Schnewille, M. (1999). Human capital and labour productivity. Integration of Institutions and endogenous growth. Paper for the EALE conference in Regensburg.
Dillender, M. (2016). The potential effects of the affordable care act on disability insurance and workers’ compensation. The Economics of Health, 81-102.
Drucker, P. (1999). Knowledge – worker productivity: the biggest challenge. California Management Review, 41(2), 78-94. https://doi.org/10.2307/41165987
Eneji, M. A., Dickson, V. J., & Onabe, B. J. (2013). Health care expenditure, health status and national productivity in Nigeria (1999–2012). Journal of Economics and International Finance, 5(7), 258-272. https://doi.org/10.5897/JEIF2013.0523
Everitt, B. S., Landau, S., Leese, M., & Stahl, D. (2001). Cluster analysis (5th ed.). London: John Wiley & Sons.
Farzanegan, M. R. (2011). Education spendings and productivity in Iran: where have the education expen-diture gone? Selected Paper of Politics and Economic Development ERF 17th Annual Conference, Turkey.
Fleisher, B. M., Hu, Y., Li, H., & Kim, S. (2011). Economic transition, higher education and worker productivity in China. Journal of Development Economics, 94(1), 86-94. https://doi.org/10.1016/j.jdeveco.2010.01.001
Forbes, M., Barker, A., & Turner, S. A. (2010). The effects of education and health on wages and pro-ductivity. Productivity Commission Staff Working Paper 1-97.
Ganotakis, P. (2012). Founders’ human capital and the performance of UK new technology based firms. Small Business Economics, 39(2), 495-515. https://doi.org/10.1007/s11187-010-9309-0
Goldin, C. (2016). Human capital. In C. Diebolt & M. Haupert (Eds.), Handbook of cliometrics (pp. 55-86). Berlin, Heidelberg: Springer-Verlag. https://doi.org/10.1007/978-3-642-40406-1_23
Goos, M., Konings, J., & Vandeweyer, M. (2015). Employment growth in Europe: the roles of innovation, local job multipliers and institutions. Local Job Multipliers and Institutions. No. 15-10.
Gwartney, J. D., Holcombe, R. G., & Lawson, R. A. (2006). Institutions and the impact of investment on growth. Kyklos, 59(2), 255-273. https://doi.org/10.1111/j.1467-6435.2006.00327.x
Hartwig, J. (2015). Structural change, aggregate demand and employment dynamics in the OECD, 1970–2010. Structural Change and Economic Dynamics, 34, 36-45. https://doi.org/10.1016/j.strueco.2015.06.001
Howitt, P. (2005). Health, human capital, and economic growth: a shumpeterian perspective. In G. Lopez-Cassasovas, B. Rivera, & L. Currais (Eds.), Health and economic growth. Findings and policy implications (pp. 19-40). The MIT Press, Cambridge, MA.
Hsiao, Ch. (2003). Analysis of panel data (2nd ed.). Cambridge: Cambridge university press. https://doi.org/10.1017/CBO9780511754203
Jajri, I., & Ismail, R. (2010). Impact of labour quality on labour productivity and economic growth. African Journal of Business Management, 4(4), 486.
Keswell, M., & Poswell, L. (2004). Returns to education in South Africa: a retrospective sensitivity analysis of the available evidence. The South African Journal of Economics, 72(4), 834-860. https://doi.org/10.1111/j.1813-6982.2004.tb00136.x
Konishi, S., & Kitagawa, G. (2008). Information criteria and statistical modeling. Kyushu University: Springer. https://doi.org/10.1007/978-0-387-71887-3
Lopez-Casasnovas, G., Rivera, B., & Currais, L. (2005). Introduction: the role health plays in economic growth. In G. Lopez-Cassasovas, B. Rivera, & L. Currais (Eds.), Health and economic growth. Findings and policy implications (pp. 1-16). The MIT Press, Cambridge, MA.
McGuirk, H., Lenihan, H., & Hart, M. (2015). Measuring the impact of innovative human capital on small firms’ propensity to innovate. Research Policy, 44(4), 965-976. https://doi.org/10.1016/j.respol.2014.11.008
Nielsen, H. S., & Westergard-Nielsen, N. (2001). Returns to schooling in LDCs: new evidence from Zambia. Centre for Labour Market and Social Research, Denmark.
Olimpia, N. (2012). Labour productivity and human capital in the EU countries: an empirical analysis. Retrieved from http://steconomiceuoradea.ro/anale/volume/2012/n1/048.pdf
Panopoulou, E., & Pantelidis, T. (2012). Convergence in per capita health expenditure and health out-comes in the OECD countries. Applied Economics, 44(30), 3909-3920. https://doi.org/10.1080/00036846.2011.583222
Pocas, A. (2014). Human capital dimensions – education and health – and economic growth. Advances in Business-Related Scientific Research Journal (ABSRJ), 5(2), 111-120.
Polasek, W., & Schwarzbauer, W. (2011). Human capital and regional growth in Switzerland. Review of Economic Analysis, 3, 46-58.
Potelienė, S., & Tamašauskienė, Z. (2014). Žmogiškojo kapitalo konceptualizacija: raida, samprata ir formavimas. Verslo sistemos ir ekonomika, 4(1), 89-106.
Qadri, F. S., & Waheed, A. (2014). Human capital and economic growth: a macroeconomic model for Pakistan. Economic Modelling, 42, 66-76. https://doi.org/10.1016/j.econmod.2014.05.021
Qu, Y., & Cai, F. (2011). Understanding China’s workforce competitiveness: a macro analysis. Journal of Chinese Human Resources Management, 2(1), 8-22. https://doi.org/10.1108/20408001111148702
Razmi, M. J., Abbasian, E., & Mohammadi, S. (2012). Investigation the effect of government health expenditure on HDI in Iran. Journal of Knowledge Management, Economics and Information Technology, 5, 1-13.
Reino, H., Kiander, J., & Matti, V. (2006). Are government expenditures productive? Measuring the effect on privat sector production. Government Institute for Economic Research (VATT) Discussion Paper, Helsinki.
Rivera, B., & Currais, L. (2003). The effect of health investment on growth: a causality analysis. Interna-tional Advances in Economic Research, 9(4), 312-323. https://doi.org/10.1007/BF02296180
Slaper, T. F., Hart, N. R., Hall, T. J., & Thompson, M. F. (2011). The index of innovation: a new tool for regional analysis. Economic Development Quarterly, 25(1), 36-53. https://doi.org/10.1177/0891242410387592
Teal, F. (2001). Education, incomes, poverty and inequality in Ghana in the 1990’s. University of Oxford.Tompa, E. (2002). The impact of health on productivity: empirical evidence and policy implications (pp. 181-202). The Review of Economic Performance and Social Progress.
Ucbasaran, D., Westhead, P., & Wright, M. (2008). Opportunity identification and pursuit: does an entrepreneur’s human capital matter?. Small Business Economics, 30(2), 153-173. https://doi.org/10.1007/s11187-006-9020-3
Umoru, D., & Yaqub, J. O. (2013). Labour productivity and health capital in Nigeria: the empirical evidence. International Journal of Humanities and Social Science, 3(4), 199-221.
Whaba, J. (2000). Returns to education and regional earnings differentials in Egypt. University of South Hampton.Whalley, J., & Xiliang, Z. (2013). The contribution of human capital to China’s economic growth. China Economic Policy Review, 2(1), 135-157. https://doi.org/10.1142/S1793969013500015
Yunus, N. M., Said, R., & Hook, L. S. (2014). Do cost of training, education level and R&D investment matter towards influencing labour productivity?. Journal Economic of Malaysia, 48(1), 133-142. https://doi.org/10.17576/JEM-2014-4801-11
Annabi, N. (2017). Investments in education: what are the productivity gains?. Journal of Policy Modeling, 39, 499-518. https://doi.org/10.1016/j.jpolmod.2017.03.003
Annabi, N., Harvey, S., & Lan, Y. (2011). Public expenditure on education, human capital and growth in Canada: an OLG model analysis. Journal of Policy Modeling, 33, 852-865. https://doi.org/10.1016/j.jpolmod.2011.08.020
Appleton, S., Hoddinoti, J., & MacKinnon, J. (1996). Education and health in sub-Sahara Africa. Journal of International Development, 8(13), 307-339. https://doi.org/10.1002/(SICI)1099-1328(199605)8:3<307::AID-JID394>3.0.CO;2-D
Arshad, M. N., & Ab Malik, Z. (2015). Quality of human capital and labor productivity: a case of Malaysia. International Journal of Economics, Management and Accounting, 23(1), 37-55.
Asteriou, D. (2009). Foreign aid and economic growth: new evidence from a panel data approach for five South Asian countries. Journal of Policy Modeling, 31(1), 155-161. https://doi.org/10.1016/j.jpolmod.2008.04.012
Backman, M. (2014). Human capital in firms and regions: impact on firm productivity. Papers in Regional Science, 93(3), 557-575. https://doi.org/10.1111/pirs.12005
Bartel, A. P. (1995). Training, wage growth, and job performance: evidence from a company data-base. Journal of Labor Economics, 13(3), 401-425. https://doi.org/10.1086/298380
Becker, G. S. (2007). Health as human capital: synthesis and extensions. Oxford Economic Papers, 59(3), 379-410. https://doi.org/10.1093/oep/gpm020
Belorgey, N., Lecat, R., & Maury, T. P. (2006). Determinants of productivity per employee: an empirical estimation using panel data. Economics Letters, 91(2), 153-157. https://doi.org/10.1016/j.econlet.2005.09.003
Benos, N., & Karagiannis, S. (2016). Do education quality and spillovers matter? Evidence on human capital and productivity in Greece. Economic Modelling, 54, 563-573. https://doi.org/10.1016/j.econmod.2016.01.015
Black, S. E., & Lynch, L. M. (1996). Human-capital investments and productivity. AEA Papers and Proceedings, 86(2), 263-267. Harvard University, Cambridge.
Bloom, D. E., Canning, D., & Sevilla, J. (2004). The effect of health on economic growth: a production function approach. World development, 32(1), 1-13. https://doi.org/10.1016/j.worlddev.2003.07.002
Burger, R. P., & Teal, F. J. (2014). The effect of schooling on worker productivity: evidence from a South African Industry panel. CSAE Working Paper WPS/2014–10.
Chang, C. F., Wang, P., & Liu, J. T. (2016). Knowledge spillovers, human capital and productivity. Journal of Macroeconomics, 47, 214-232. https://doi.org/10.1016/j.jmacro.2015.11.003
Chani, M. I. & Shahid, M. (2012). Human capital formation and economic development in Pakistan: an empirical analysis. Aktual’nі problemi ekonomіki, (6), 486-495.
Chansarn, S. (2010). Labor productivity growth, education, health and technological progress: a cross-country analysis. Economic Analysis and Policy, 40(2), 249-261. https://doi.org/10.1016/S0313-5926(10)50027-4
de la Escosura, L. P., & Rosés, J. R. (2010). Human capital and economic growth in Spain, 1850–2000. Explorations in Economic History, 47(4), 520-532. https://doi.org/10.1016/j.eeh.2010.02.002
Delsen, L., & Schnewille, M. (1999). Human capital and labour productivity. Integration of Institutions and endogenous growth. Paper for the EALE conference in Regensburg.
Dillender, M. (2016). The potential effects of the affordable care act on disability insurance and workers’ compensation. The Economics of Health, 81-102.
Drucker, P. (1999). Knowledge – worker productivity: the biggest challenge. California Management Review, 41(2), 78-94. https://doi.org/10.2307/41165987
Eneji, M. A., Dickson, V. J., & Onabe, B. J. (2013). Health care expenditure, health status and national productivity in Nigeria (1999–2012). Journal of Economics and International Finance, 5(7), 258-272. https://doi.org/10.5897/JEIF2013.0523
Everitt, B. S., Landau, S., Leese, M., & Stahl, D. (2001). Cluster analysis (5th ed.). London: John Wiley & Sons.
Farzanegan, M. R. (2011). Education spendings and productivity in Iran: where have the education expen-diture gone? Selected Paper of Politics and Economic Development ERF 17th Annual Conference, Turkey.
Fleisher, B. M., Hu, Y., Li, H., & Kim, S. (2011). Economic transition, higher education and worker productivity in China. Journal of Development Economics, 94(1), 86-94. https://doi.org/10.1016/j.jdeveco.2010.01.001
Forbes, M., Barker, A., & Turner, S. A. (2010). The effects of education and health on wages and pro-ductivity. Productivity Commission Staff Working Paper 1-97.
Ganotakis, P. (2012). Founders’ human capital and the performance of UK new technology based firms. Small Business Economics, 39(2), 495-515. https://doi.org/10.1007/s11187-010-9309-0
Goldin, C. (2016). Human capital. In C. Diebolt & M. Haupert (Eds.), Handbook of cliometrics (pp. 55-86). Berlin, Heidelberg: Springer-Verlag. https://doi.org/10.1007/978-3-642-40406-1_23
Goos, M., Konings, J., & Vandeweyer, M. (2015). Employment growth in Europe: the roles of innovation, local job multipliers and institutions. Local Job Multipliers and Institutions. No. 15-10.
Gwartney, J. D., Holcombe, R. G., & Lawson, R. A. (2006). Institutions and the impact of investment on growth. Kyklos, 59(2), 255-273. https://doi.org/10.1111/j.1467-6435.2006.00327.x
Hartwig, J. (2015). Structural change, aggregate demand and employment dynamics in the OECD, 1970–2010. Structural Change and Economic Dynamics, 34, 36-45. https://doi.org/10.1016/j.strueco.2015.06.001
Howitt, P. (2005). Health, human capital, and economic growth: a shumpeterian perspective. In G. Lopez-Cassasovas, B. Rivera, & L. Currais (Eds.), Health and economic growth. Findings and policy implications (pp. 19-40). The MIT Press, Cambridge, MA.
Hsiao, Ch. (2003). Analysis of panel data (2nd ed.). Cambridge: Cambridge university press. https://doi.org/10.1017/CBO9780511754203
Jajri, I., & Ismail, R. (2010). Impact of labour quality on labour productivity and economic growth. African Journal of Business Management, 4(4), 486.
Keswell, M., & Poswell, L. (2004). Returns to education in South Africa: a retrospective sensitivity analysis of the available evidence. The South African Journal of Economics, 72(4), 834-860. https://doi.org/10.1111/j.1813-6982.2004.tb00136.x
Konishi, S., & Kitagawa, G. (2008). Information criteria and statistical modeling. Kyushu University: Springer. https://doi.org/10.1007/978-0-387-71887-3
Lopez-Casasnovas, G., Rivera, B., & Currais, L. (2005). Introduction: the role health plays in economic growth. In G. Lopez-Cassasovas, B. Rivera, & L. Currais (Eds.), Health and economic growth. Findings and policy implications (pp. 1-16). The MIT Press, Cambridge, MA.
McGuirk, H., Lenihan, H., & Hart, M. (2015). Measuring the impact of innovative human capital on small firms’ propensity to innovate. Research Policy, 44(4), 965-976. https://doi.org/10.1016/j.respol.2014.11.008
Nielsen, H. S., & Westergard-Nielsen, N. (2001). Returns to schooling in LDCs: new evidence from Zambia. Centre for Labour Market and Social Research, Denmark.
Olimpia, N. (2012). Labour productivity and human capital in the EU countries: an empirical analysis. Retrieved from http://steconomiceuoradea.ro/anale/volume/2012/n1/048.pdf
Panopoulou, E., & Pantelidis, T. (2012). Convergence in per capita health expenditure and health out-comes in the OECD countries. Applied Economics, 44(30), 3909-3920. https://doi.org/10.1080/00036846.2011.583222
Pocas, A. (2014). Human capital dimensions – education and health – and economic growth. Advances in Business-Related Scientific Research Journal (ABSRJ), 5(2), 111-120.
Polasek, W., & Schwarzbauer, W. (2011). Human capital and regional growth in Switzerland. Review of Economic Analysis, 3, 46-58.
Potelienė, S., & Tamašauskienė, Z. (2014). Žmogiškojo kapitalo konceptualizacija: raida, samprata ir formavimas. Verslo sistemos ir ekonomika, 4(1), 89-106.
Qadri, F. S., & Waheed, A. (2014). Human capital and economic growth: a macroeconomic model for Pakistan. Economic Modelling, 42, 66-76. https://doi.org/10.1016/j.econmod.2014.05.021
Qu, Y., & Cai, F. (2011). Understanding China’s workforce competitiveness: a macro analysis. Journal of Chinese Human Resources Management, 2(1), 8-22. https://doi.org/10.1108/20408001111148702
Razmi, M. J., Abbasian, E., & Mohammadi, S. (2012). Investigation the effect of government health expenditure on HDI in Iran. Journal of Knowledge Management, Economics and Information Technology, 5, 1-13.
Reino, H., Kiander, J., & Matti, V. (2006). Are government expenditures productive? Measuring the effect on privat sector production. Government Institute for Economic Research (VATT) Discussion Paper, Helsinki.
Rivera, B., & Currais, L. (2003). The effect of health investment on growth: a causality analysis. Interna-tional Advances in Economic Research, 9(4), 312-323. https://doi.org/10.1007/BF02296180
Slaper, T. F., Hart, N. R., Hall, T. J., & Thompson, M. F. (2011). The index of innovation: a new tool for regional analysis. Economic Development Quarterly, 25(1), 36-53. https://doi.org/10.1177/0891242410387592
Teal, F. (2001). Education, incomes, poverty and inequality in Ghana in the 1990’s. University of Oxford.Tompa, E. (2002). The impact of health on productivity: empirical evidence and policy implications (pp. 181-202). The Review of Economic Performance and Social Progress.
Ucbasaran, D., Westhead, P., & Wright, M. (2008). Opportunity identification and pursuit: does an entrepreneur’s human capital matter?. Small Business Economics, 30(2), 153-173. https://doi.org/10.1007/s11187-006-9020-3
Umoru, D., & Yaqub, J. O. (2013). Labour productivity and health capital in Nigeria: the empirical evidence. International Journal of Humanities and Social Science, 3(4), 199-221.
Whaba, J. (2000). Returns to education and regional earnings differentials in Egypt. University of South Hampton.Whalley, J., & Xiliang, Z. (2013). The contribution of human capital to China’s economic growth. China Economic Policy Review, 2(1), 135-157. https://doi.org/10.1142/S1793969013500015
Yunus, N. M., Said, R., & Hook, L. S. (2014). Do cost of training, education level and R&D investment matter towards influencing labour productivity?. Journal Economic of Malaysia, 48(1), 133-142. https://doi.org/10.17576/JEM-2014-4801-11