Human Capital Composition, Proximity to Technology Frontier and Productivity Growth

The role of human capital composition has been given importance in the most recent endogenous growth models. Assuming that primary as well as secondary education is more suitable for imitation and higher education is more appropriate for innovation, this paper empirically investigates whether the contribution of human capital to productivity growth depends on the composition of human capital and the proximity to technology frontier in a panel of 87 sample countries over the period of 1970 to 2004. The sample is further divided into 28 high, 37 medium, and 22 low income countries to gain some insights into the importance of composition effects of human capital on growth in developing countries relative to their developed counterparts. Using different levels of human capital data from four alternative sources empirical results from system GMM estimator demonstrate that growth enhancing effect of skilled human capital increases with the proximity to the technology frontier only for high and medium income countries. Unskilled human capital is contributing more for low income countries as they move closer to the technology frontier. Matured workers with tertiary education are more growth enhancing for high and medium income countries, whereas younger workers with secondary education are more growth improving for low income countries. Estimated results are consistent across male and female workers. JEL Classifications: I20, O30, O40