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Human Capital in Economic Development: From Labour Productivity to Macroeconomic Impact
Author(s) -
Hermannsson Kristinn,
Lecca Patrizio
Publication year - 2016
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/1759-3441.12126
Subject(s) - economics , human capital , productivity , labour economics , general equilibrium theory , capital deepening , macroeconomics , capital formation , financial capital , economic growth
Microeconometric evidence reveals high private returns to education, most prominently in low‐income countries. However, it is disputed to what extent this translates into a macroeconomic impact. This paper projects the increase in human capital from higher education in Malawi and uses a dynamic applied general equilibrium model to estimate the resulting macroeconomic impact. This is contingent upon endogenous adjustments, in particular how labour productivity affects competitiveness and if this in‐turn stimulates exports. Choice among labour market assumptions and trade elasticities results in widely different outcomes. Appraisal of such policies should consider not only the impact on human capital stocks, but also adjustments outside the labour market.