Does financial development affect human capital? Evidence from Vietnam

Purpose The purpose of this study is to explore the relationship among financial development (FD), economic growth, urbanization and human capital (HC) in Vietnam. Design/methodology/approach This study uses various wavelet tools, including wavelet coherence, wavelet correlation and scale-by-scale Granger causality test, to re-visit the lead–lag structure among economic growth, FD, urbanization and HC in Vietnam from 1980 to 2017. Findings The main findings indicate that economic growth and urbanization improve HC at the medium and low frequencies, whereas FD negatively affects HC from 1989 to 2017. Furthermore, the scale-by-scale Granger causality results confirm a uni-directional causality relationship between economic growth to HC at low and high frequencies. In contrast, a bi-directional causality relationship between urbanization and HC is found in the long run. Research limitations/implications Policy implications have emerged based on the empirical results from this study. The Vietnamese Government should continue supporting economic integration, implementing investment promotion policies and focussing on foreign direct investment using green technologies. Originality/value The impact of FD on HC at different time scales has largely been ignored in Vietnam. This study substantially contributes to the existing literature regarding HC and FD. This analysis is one of the earliest attempts to examine the effects of economic indicators on HC in the time-frequency analysis.