The Impact of Human Capital on Economic Growth: the Case of Mexico

Abstract

In this article, we estimate the relationship between human capital and economic growth for the case of Mexico for the 1971–2010 period. Using an ordinary least squares model and also an ordinary least squares model with structural change, it was found that the independent variables used in the model explain up to 50% of the variability of GDP per worker. The results of the estimated regressions indicated that a 1% change in the gross enrollment ratio at the secondary level leads to a 1.08% increase in GDP per worker. Similarly, a 1% increase in the differences in capital investment as a percentage of GDP leads to a 0.39% increase in GDP per worker. These results show that the impact of human capital on Mexico’s economic growth is significantly greater than that of physical capital, since the estimated coefficients of human capital are almost three times of those of physical capital. Also, the results of the Granger causality test indicated the existence of a bidirectional causality between human capital and economic growth in Mexico.