Impact of Human Capital Development on Economic Progress: A Panel Data Analysis by Using Classical and Bayesian Estimates

Abstract

This comparative research debates a magnified role of human capital development in selected developed, developing economies and less developing economies, including Pakistan. Between 1990 and 2019, two-panel data analysis techniques were employed, one classical and the other Bayesian. The key objective of this study was to investigate the impact of human capital development on economic growth, and also suggest the best statistical techniques for developing an appropriate model. GDP is the dependent variable, whereas the independent variables are human capital, physical capital, physical and human capital growth, health expenditure, education spending, and life expectancy rate. For the optimal model, both Bayesian and classical approaches were used to analyze the appropriate model. Empirical evidence has shown that human capital is the most important factor and is directly correlated with growth in any economy Furthermore, the findings suggested that Bayesian techniques produce more appropriate models for policy implications than classical techniques.