Nexus Between Human Capital, Technology and Economic Growth: The Role of Stages of Economic Development in Asian Countries

Abstract

This paper explores the effect of human capital and technology on economic growth in Asian countries while considering economic development. The paper expands the Solow Growth model by further incorporating the import of machinery and equipment reflecting total factor productivity. Panel data for 30 Asian countries has been used over 1995-2015. Due to the endogeneity problem in human capital and other variables, the System Generalized Method of Moment (GMM) is used to address this problem. Empirical results reveal that human capital and technology have increased economic growth in the total sample of Asian countries. Furthermore, the sample has been disaggregated into high-income (HI) and low-income (LI) Asian countries. Our findings determine that human capital and technology are reflecting a positive and statistically significant role in enhancing economic growth in both samples of countries. However, the magnitude of the impact is high in HI Asian countries relative to LI Asian countries, respectively. When the import of machinery and equipment are replaced with patents, a positive and insignificant results are obtained for LI countries because these countries have lacked legal systems, but a positive and statistically significant relationship is observed for HI Asian countries.