Causal relationship between human capital and economic growth in European Countries (EU-28): Panel analysis

Abstract

© 2019, Research Trend. All rights reserved. The main objective of this study is to examine the empirical relationship between education, labor, and innovation as a proxy human capital and GDP per capita in European countries (EU-28). Our hypothesis is that (1) human capital is positive (significantly) related to the GDP per capita. (2) The human capital plays the same role of physical capital in increasing the real GDP per capita. The statistical methods utilized are the Panel Data (fixed and random effect) Model for (EU-28) through the period from 1995 to 2017. Findings, there is a strong relationship between human capital and real GDP per capita in (EU-28), this the human capital plays an important role in those countries, according to the endogenous economic theory, especially, (MRW model). Also, the paper concludes that human capital plays the same role of physical capital in increasing the real GDP per capita.