Human capital, production and growth in East Asia

Abstract

The present study uses a production function and an alternative empirical strategy to investigate the importance of human capital on the level and growth of output by focusing on a single region, namely East Asia. The finding is that educational attainment (measured by average years of schooling) statistically significantly correlates with subsequent income levels. This in turn implies that a change in educational attainment has a positive effect on this group of countries’ income growth. However, the evidence is less clear-cut, and varies when the aggregate measure of educational attainment is decomposed into different school levels; namely primary, secondary and higher level. In all cases the impact of primary education remains positive but only significant in some cases. In all cases, a statistically significant positive effect was found for average years of school at secondary level. The impact of higher school level (than secondary level) in all cases is insignificant and surprisingly tends to have a negative effect on income level and growth.