The Role of Human Capital On Economic Development in Europe & Central Asia

English

Abstract

This article explores the relationship between human capital and economic development in
the Europe & Central Asia region, which consists of 23 diverse countries. The article uses
the Human Capital Index (HCI) as a measure of human capital, which reflects the health,
education, and skills of a population. The article reviews the theoretical and empirical
literature on human capital theory, which suggests that education enhances the earnings and
productivity of workers and generates positive externalities for society. The article also
employs a vector autoregression (VAR) model to estimate the impact of human capital on
four economic indicators: education level (ET), per capita income growth rate (PG), literacy
rate (LR), and greenhouse gas emissions (GEE). The article finds that human capital has a
positive and significant effect on itself and a negative and significant effect on PG and LR,
but no significant effect on GEE. The article concludes that human capital is an important
factor for economic development, but its effects vary depending on the indicator and the
context. The article recommends that policy makers adopt a comprehensive and contextspecific approach to invest in human capital and enhance its outcomes.