Human Capital and Development

This chapter in the Routledge Handbook of International Education and Development reviews theory and evidence on the economics of human capital, with an emphasis on the education aspect of human capital and its impact on economic growth in developing countries. Results for Development (R4D) authors Milan Thomas and Nick Burnett focus their discussion on development as measured by economic growth (i.e., change in gross domestic product) while recognizing that there is a range of other dimensions that human capital accumulation influences, such as social development and health.

Tracking the evolution of economic thought on this topic from its origins to its inclusion in macroeconomic growth models, Thomas and Burnett review the concept of human capital and then labor market research on its relationship with individual earnings before turning to its impact on aggregate income. The authors evidence primarily from human capital’s inclusion in neoclassical growth models rather than endogenous growth models because the former is relatively strong at explaining cross-country differences in national income while the latter is more pertinent to advanced economies in the global technological frontier (Barro and Lee 2013). They also consider how the estimation of education’s impact on development has changed due to recent advances in the measurement of human capital.

Understanding the nuances of human capital’s role in development is not an academic exercise. Evidence on it can guide public policy and encourage it so that scarce resources are channeled to impactful investments in human productive capacity that will accelerate economic growth and poverty reduction. In addition to reviewing research on human capital’s impact on growth through labor force productivity, Thomas and Burnett highlight emerging evidence on the importance of human capital investment for promoting equity and environmental sustainability – both of which will be critical for sustaining economic growth through the 21st century.

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