Human Capital for Innovation Capacity in Middle-Income Economies

This paper examines the impact of the human capital composition of unskilled, skilled, and high-skilled levels on the innovation capacity of middle-income economies. Data from 65 countries in lower middle-income, upper middle income, and high-income categories over the period of 1985-2019 is used. Panel data regressions are employed. Results suggest the innovation capacity enhancing effects of high-skilled human capital in upper-middle income countries (UMICs) and high-income countries. For lower middle-income countries (LMICs), the skilled human capital is the important workforce fostering their innovation capacity, while the R&D personnel of high-skilled human capital is yet to be important. Unskilled human capital is confirmed to not play any role in innovation development in MIEs and above. For UMICs, high-skilled human capital is supported by the foreign innovation diffusion through imports, and R&D capital stocks; while for LMICs, FDI-embodied foreign innovation supplements the skilled human capital to build up innovation capacity.