Human resource, financial market development and economic growth in Saudi Arabia: a role of human capital

Human Capital (HC) is considered as a key factor in determining and accelerating the economic growth in this modern age due to productivity gains. The present study explores the impact of human resources and financial market development (FMD) on the economic growth of Saudi Arabia by using data of 1970-2017 and by applying the autoregressive distributed lag (ARDL) cointegration methodology. Our findings suggest that the interaction between HC and human resources or between capital and FMD contributes positively to the economic growth in Saudi Arabia. Further, elasticity of FMD is found greatest in comparison of other growth factors. The elasticity implies that human capital is not enough to largely support the financial market. Its improvement, however, will promote the economic growth at higher pace as an increase of 1% in FMD interacting with human capital will increase economic growth by 0.688%. The findings of our research corroborate the importance and complementarity of HC and growth factors in enhancing the economic growth and we recommend the policy makers to focus on improving human capital in the kingdom through effective educational policies.