IMPACT OF HUMAN CAPITAL ON ECONOMIC GROWTH IN D-8 COUNTRIES: GMM ESTIMATION OF PANEL DATA MODELS

Abstract

This study has been conducted to explore the role of health capital and education capital as compared to physical
capital in economic growth of eight developing countries (D-8). The model is specified on the basis of Solow
Growth extended model for economic growth. Data is covering twenty-one years from 1995 to 2015. GMM is used
to estimate panel data models as causality test proves endogeneity problem in the specified model. This study
provides empirical evidence that human capital (i.e. education capital and health capital) and physical capital
positively affect economic growth of D-8 economies. However, human capital as compared to physical capital
seems to be the engine of economic growth in these developing countries. Policy makers should consider investing
in initiatives that improve human capital, such as providing better education opportunities, improving public health
initiatives, and providing better access to healthcare. They should also seek to ensure that initiatives to increase
physical capital, such as infrastructure and technological advancements, are implemented in a way that benefits
communities with the greatest need. Additionally, policy makers should consider initiatives that incentivize
businesses to invest in their employees, such as providing tax credits for businesses that invest in employee training
and development. Finally, policy makers should make sure that any initiatives to increase human and physical
capital are equitable and accessible to all citizens, regardless of their social, economic, or racial backgrounds.