Human Capital Development and Economic Growth in BRICS Countries: Controlling for Country Differences
This paper investigates the effect of human capital development on economic growth, as well as controlling for country differences, in the BRICS economies – from 1990 to 2017. Ordinary Least Square (OLS) and Generalized Method of Moments (GMM) were used as the estimation techniques. We use one-way ANOVA and Scheffe pairwise comparison tests to understand how human capital development differed between each pair of countries. Findings suggest that the effect of human capital development on economic growth, though significant, was limited in these countries. A comparative analysis of results showed that China, Brazil and Russia were able to utilise their human capital to enhance economic growth more efficiently than South Africa and India. Consequently, this study observed that a 1% increase in government expenditure on education would result in a 0.13% increase in GDP for China, a 0.06% increase in Russia, a 0.07% increase in Brazil, a 0.04% increase in South Africa, and a 0.01% increase in GDP in India. In addition, the study concluded that human capital development practices differ in all the countries. Although this result was previously implied in the literature, comparison of a comprehensive list of human capital development practices among countries was lacking. Overall, the paper argues that the classical theory of economic growth, in combination with the new theory, and also the theory of market value, will not only help sustain a strategy tripod, but also shed significant light on the most fundamental questions confronting human capital development and economic growth in many developing economies.
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