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The Effect of Increasing Human Capital Investment on Economic Growth and Poverty : A Simulation Exercise

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  • Collin,Matthew Edward
  • Weil,David Nathan
Abstract
This paper examines the dynamic responses of income and poverty to increased investment in the human capital of new cohorts of workers, using a quantitative macroeconomic model with realistic demography. Compared to a baseline in which the rate of human capital investment currently observed in every country remains constant, the paper examines two alternative scenarios: one in which each country experiences a rate of growth of human capital investment that is typical of what was observed in the decade ending in 2015, and one in which each country raises human capital investment at a rate corresponding to the 75th percentile of what was observed in the data. In the former, world GDP per capita is 5 percent higher than baseline in the year 2050, while the global rate of $1.90 poverty is 0.7 percentage points lower in that year. In the latter, world GDP per capita is 12 percent higher than baseline in 2050, while the rate of $1.90 poverty drops by 1.4 percentage points. These gains are concentrated in poor countries. The paper argues in the context of our model that investing in people is more cost effective than investing in physical capital as a means to achieve specified income or poverty goals.

Suggested Citation

  • Collin,Matthew Edward & Weil,David Nathan, 2018. "The Effect of Increasing Human Capital Investment on Economic Growth and Poverty : A Simulation Exercise," Policy Research Working Paper Series 8590, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8590
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    Cited by:

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    3. Alma Mačiulytė-Šniukienė & Mindaugas Butkus & Renata Macaitienė & Vida Davidavičienė, 2022. "Infrastructure and EU Regional Convergence: What Policy Implications Does Non-Linearity Bring?," Mathematics, MDPI, vol. 11(1), pages 1-22, December.
    4. Alicia Girón & Amirreza Kazemikhasragh, 2022. "Gender Equality and Economic Growth in Asia and Africa: Empirical Analysis of Developing and Least Developed Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(2), pages 1433-1443, June.
    5. Pennings,Steven Michael, 2020. "The Utilization-adjusted Human Capital Index (UHCI)," Policy Research Working Paper Series 9375, The World Bank.
    6. Barbara Dañska-Borsiak, 2023. "Human capital convergence in European NUTS 2 regions," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 18(2), pages 367-392, June.
    7. Natalia P Montoya & Lia C O B Glaz & César C C Abad & Lucas A Pereira & Irineu Loturco, 2020. "What teachers need to know and be able to do: A view from teachers, students, and principals in the Brazilian context," PLOS ONE, Public Library of Science, vol. 15(9), pages 1-12, September.
    8. Carlos Mendez & Erick Gonzales, 2021. "Human Capital Constraints, Spatial Dependence, and Regionalization in Bolivia: A Spatial Clustering Approach," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 44(87), pages 115-145.
    9. Yasser Razak Hussain & Pranab Mukhopadhyay, 2023. "How Much do Education, Experience, and Social Networks Impact Earnings in India? A Panel Data Analysis Disaggregated by Class, Gender, Caste and Religion," SAGE Open, , vol. 13(4), pages 21582440231, December.
    10. Nicoleta Valentina Florea & Constantin Aurelian Ionescu & Marinela Daniela Manea & Dan Ioan Topor & Sorinel Capusneanu & Dan Marius Coman & Sorina Geanina Stanescu & Mihaela Denisa Coman, 2023. "Implementing ABC as Cost Management Model for the Human Resources Department: Evidence From a Romanian Entity," SAGE Open, , vol. 13(2), pages 21582440231, May.
    11. Agasisti, Tommaso & Bertoletti, Alice, 2022. "Higher education and economic growth: A longitudinal study of European regions 2000–2017," Socio-Economic Planning Sciences, Elsevier, vol. 81(C).
    12. Huang, Chien-Chung & Jin, Huiying & Zhang, Jieyou & Zheng, Qinqin & Chen, Yafan & Cheung, Shannon & Liu, Chuwei, 2020. "The effects of an innovative e-commerce poverty alleviation platform on Chinese rural laborer skills development and family well-being," Children and Youth Services Review, Elsevier, vol. 116(C).
    13. Yahya Fikri & Rhalma Mohamed, 2024. "Impact of Education, Life Expectancy, and Labour Force on Economic Growth: The Case of Morocco," Post-Print hal-04701464, HAL.

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