The role of human capital in the structural change process

Abstract

The objective of this paper is to verify if human capital is an important determinant of structural change in different sectors of the economy and if it can accelerate the speed of this structural transformation. This paper contributes to the literature by developing an empirical test of the model proposed by Li et al. (2019) and by using the GMM methodology. It also uses two proxies for human capital (average years of schooling and the Penn World Table index) and structural change (employment and added value share) in order to verify whether or not they affect the variable of interest. Results showed that human capital has an essential role in the structural transformation process of the economy, since it has an effect on the relative participation of the sectors on total added value or on total employment. Also, human capital proved to be a potential ac-celerator of this structural transformation.