Human Capital And Its Effects On The Economy Essay example

725 Words 3 Pages
It is frequently stated in economic textbooks that quality of human capital makes an important contribution to the economic growth in the country. One curious question which I decided to explore is whether this relationship holds for the horizon of available data on the US economy, controlling for other potentially influential variables. The dataset which was analyzed was taken from the official website of the World Bank, more specifically – its Open Data section (World Bank, 2016). Time horizon of 1991-2014 chosen due to the fact that only for these years data on all variables is available.
2. The regression equation which was estimated is as follows:
GDP = β0 + β1*TERT + β2*UNEMP + β3*FDI + ε, where:

GDP – Gross Domestic Product per capita in US 1991-2014, current US$

TERT – tertiary enrolment (proxy for human capital), in %

UNEMP – unemployment, in %

FDI – amount of foreign direct investment, in US dollars

ε - stochastic error term

Together with the proxy for human capital, the level of tertiary enrolment, two other control variables are included into the regression. I would expect the value of beta next to the FDI to be positive, as foreign direct investments are claimed to stimulate the economy, and the beta next to unemployment – negative, as lower levels of employment produce lower output and therefore GDP. Coefficient next to tertiary enrolment I expect to be positive as higher quality of human capital is associated with higher GDP.

3. Coefficient beta next…

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