Comparing Macroeconomic Returns on Human and Public Capital: An Empirical Analysis of the Portuguese Case (1960-2001)
Posted: 27 Dec 2006
The impact of human and public capital on growth is a major issue in economic theory and in policy evaluation. Using a cointegrated vector autoregression (VAR),weestimate a Cobb-Douglas production function for Portugal with public and human capital. Return rates are then computed with and without dynamic feedbacks.Without these, human capital yields a return comparable to private investment, and smaller than public investment. Considering dynamic feedbacks, private capital responds positively to a shock in public capital, but negatively to a shock in human capital. Consequently, the dynamic feedbacks return on human capital is much lower than on public capital.
Keywords: Human capital, Public capital, Economic growth, Portugal
JEL Classification: I20, H54, O47
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