Human Capital and Growth: Theory and Evidence

51 Pages Posted: 26 May 2004 Last revised: 8 Sep 2010

See all articles by Paul M. Romer

Paul M. Romer

National Bureau of Economic Research (NBER)

Date Written: November 1989

Abstract

This paper outlines a theoretical framework for thinking about the role of human capital in a model of endogenous growth. The framework pays particular attention to two questions: What are the theoretical differences between intangibles like education and experience on the one hand, and knowledge or science on the other? and How do knowledge and science actually affect production? One implication derived from this framework is that the initial level of a variable like literacy may be important for understanding subsequent growth. This emphasis on the level of an input contrasts with the usual emphasis from growth accounting on rates of change of inputs. The principal empirical finding is that literacy has no additional explanatory power in a cross-country regression of growth rates on investment and other variables, but consistent with the model, the initial level of literacy does help predict the subsequent rate of investment, and indirectly, the rate of growth.

Suggested Citation

Romer, Paul M., Human Capital and Growth: Theory and Evidence (November 1989). NBER Working Paper No. w3173, Available at SSRN: https://ssrn.com/abstract=227284

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