Citation:

Waleed Ahmed Almahruqi, Fahad Said Al Abd Alhajri, Zouheir Abida. "Human Capital and Economic Growth in North African Countries: The Role of Institutional Quality" International Research Journal of Economics and Management Studies, Vol. 3, No. 6, pp. 54-61, 2024.

Abstract:

This paper aims to study the association between institutional quality, human capital, and economic growth in 4 North African countries. Annual panels over the 2000 to 2021 period are examined using the System GMM. The results show that institutional quality and human capital can fuel economic growth. Interestingly, institutional quality and human capital have a significant positive interactive impact on the economic growth of North African countries. The results of this study have policy implications that call for co-development policies to be carefully considered in order to raise the standard of these nations’ institutions and human resources. To ensure sustained economic growth, policies should carefully consider economic growth strategies.

References:

[1] Abdulwahab, L.O, (2023), “The role of institutional quality, human capital development on economic growth in Sub-Saharan Africa”, International Journal of Business Economics 5(1), 92-115.
[2] Acemoglu, D, and Robinson, J.A, (2012). Why Nations Fail: The Origins of Power, Prosperity and Poverty. (Rough Cut). Crown Publishing.
[3] Acemoglu, D, and Robinson, J.A, (2008), “Persistence of power, elites and institutions”, American Economic Review, 98 (1), 267-293.
[4] Acemoglu, D, Johnson, S, and Robinson, J, (2012), “The colonial origins of comparative development: An empirical investigation”, American Economic Review, 102(6), 3077-3110.
[5] Acemoglu, D, Johnson, S, and Robinson, J.A, (2005), “Institutions as a fundamental cause of long-run growth”, Handbook of Economic Growth, 1, 385472.
[6] Ali, S, Yusop, Z, Kaliappan, S.R, Chin, L., and Nazar, R, (2022), “Impact of trade openness, human capital, and institutional performance on economic growth: Evidence from Organization of Islamic Cooperation countries”, Journal of Public Affairs, 22:e2654.
[7] Arellano, M, and Bond, S, (1991), “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations”, Review of Economic Studies, 58(2), 277-297.
[8] Aydın, C, Esenb, O, and Bayrakc, M (2016), “Inflation and economic growth: A dynamic panel threshold analysis for Turkish republics in transition process”, Procedia - Social and Behavioral Sciences, 229, 196-205.
[9] Barro, R. (1991), “Economic growth in a cross-section of countries”, The Quarterly Journal of Economics, 106, 407-443.
[10] Barro, R. (1997). Determinants of economic growth: A cross-country empirical study. Cambridge and London: MIT.
[11] Barro, R.J, and Sala-i-Martin, X, (1997), “Technological diffusion, convergence, and growth.” Journal of Economic Growth, 2(1), 1-27.
[12] Blundell, R, and Bond, S (1998), “Initial conditions and moment restrictions in dynamic panel data models”, Journal of Econometrics, 87, 115-143.
[13] Brkic, I, Gradojevic, N, and Ignjatijevic, S (2020), “The impact of economic freedom on economic growth? New European dynamic panel evidence”, Journal of Risk and Financial Management, 13(26), 1-13.
[14] Busse, M, and Hefeker, C, (2007), “Political risk, institutions and foreign direct investment,” European Journal of Political Economy, 23(2), 397-415
[15] Čadil, J, Petkovová, L., and Blatná, D (2014), “Human capital, economic structure and growth”, Procedia Economics and Finance, 12, 85-92.
[16] Catrinescu, N, Leon-Ledesma, M., Piracha, M., and Quillin, B, (2009), “Remittances, institutions, and economic growth”, World Development, 37(1), 81-92.
[17] De Haan, J, and Sturm, J.E, (2000), “On the relationship between economic freedom and economic growth”, European Journal of Political Economy,16, 215-241.
[18] Deere, D.R, and Vesovic, J, (2006). Chapter 6 Educational wage premiums and the US income distribution: A survey. In E. Hanushek & F. Welch (Eds.), Handbook of the economics of education (pp. 255-306). USA: Elsevier.
[19] Devarajan, S, Swaroop, V and Heng-fu, Z, (1996), “The composition of public expenditure and economic growth,” Journal of Monetary Economics, 37(2-3), 313-344.
[20] Doré, N.I, and Teixeira, A.A.C, (2023), “The role of human capital, structural change, and institutional quality on Brazil’s economic growth over the last two hundred years (1822-2019)”, Structural Change and Economic Dynamics, 66, 1-12.
[21] Doucouliagos, C, and Ulubasoglu, M.A, (2006), “Economic freedom and economic growth: Does specification make a difference?”, European Journal of Political Economy, 22(1), 60-81.
[22] Engerman, SL, and Sokoloff, K.L, (2002), “Factor endowments, inequality, and paths of development among new world economics”, NBER Working Papers N°9259.
[23] Fang, Z, and Chang, Y (2016), “Energy, human capital and economic growth in Asia Pacific countries - evidence from a panel cointegration and causality analysis”, Energy Economics, 56, 177-184.
[24] Gemmel, N, (1996), “Evaluating the impacts of human capital stocks and accumulation on economic growth: some new evidence”, Oxford Bulletin of Economics and Statistics, 58(1), 9-28.
[25] Gupta, S, Clements, B, Baldacci, E, and Mulas-Granados, C, (2005), “Fiscal policy, expenditure composition, and growth in low-income countries”, Journal of International Money and Finance, 24, 441-463.
[26] Gwartney, J, Lawson, R, Hall, J., and Murphy, R (2023). Economic Freedom of the World-2023, Annual Report. Fraser Institute.
[27] Hall, R.E, and Jones, C. I (1999), “Why do some countries produce so much more output per worker than others?” Quarterly Journal of Economics, 114, 83-116.
[28] Han, J.S, and Lee, J.W (2020), “Demographic change, human capital, and economic growth in Korea”, Japan and the World Economy, 53, 100984.
[29] Heckman, J, and Jacobs, B., (2010), “Policies to create and destroy human capital in Europe”, NBER Working Paper, N°15742.
[30] Jaiyeoba, S.V, (2015), “Human capital investment and economic growth in Nigeria”, African Research Review, 9(1), 30-46.
[31] Knack, S, and Keefer, P., (1997), “Does social capital have an economic payoff? A cross-country investigation”, The Quarterly Journal of Economics, 112, 1251-1288.
[32] Lucas, R., (1988), “On the mechanics of economic development”, Journal of Monetary Economics, 22, 3-42.
[33] Mankiw, N.G., Romer, D., and Weil, D.N., (1992). “A contribution to the empirics of economic growth”, The Quarterly Journal of Economics, 107(2), 407-437.
[34] Mauro, (1995), “Corruption and growth”, The Quarterly Journal of Economics, 110, 681-712.
[35] Méon, P.G, and Sekkat, K, (2004), “Does the quality of institutions limit the MENA’s integration in the world economy?”, The World Economy, 27(9), 1475-1498.
[36] Nawaz, S (2015), “Growth effects of institutions: a disaggregated analysis”, Economic Modelling, 45, 118-126.
[37] Nelson, R.R, and Phelps, E.S, (1966), “Investment in humans, technological diffusion, and economic growth”, The American Economic Review, 56, 6975.
[38] North, DC, (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press: New York.
[39] North, D.C., Wallis, J.J. and Weingast, B. (2009). Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History, Cambridge University Press, New York.
[40] Nyamongo, E.M, Misati, R.N, Kipyegon, L, and Ndirangu, L, (2012), “Remittances, financial development and economic growth in Africa”, Journal of Economics and Business, 64, 240-260.
[41] Ogbeifun, L, and Shobande, O.A., (2022), “A reevaluation of human capital accumulation and economic growth in OECD”, Journal of Public Affairs, 22: e2602.
[42] Ogundari, K, and Awokuse, T (2018), “Human capital contribution to economic growth in Sub-Saharan Africa: does health status matter more than education?”, Economic Analysis and Policy, 58, 131-140.
[43] Oketch, M.O, (2006), “Determinants of human capital formation and economic growth of African countries”, Economics of Education Review, 25(5), 554-564.
[44] Olayungbo, D.O, and Quadri, A, (2019), “Remittances, financial development and economic growth in Sub-Saharan African countries: Evidence from a PMG-ARDL approach”, Financial Innovation, 5(9), 1-25.
[45] Ouedraogo, R, Sourouema, W.S, Sawadogo, H, (2021), “Aid, growth and institutions in Sub-Saharan Africa: New insights using a multiple growth regime approach”, The Word Economy, 44, 107-142.
[46] Pelinescu, E, (2015), “The impact of human capital on economic growth”, Procedia Economics and Finance, 22, 184-190.
[47] Poku, K, Opoku, E, and Ennin, P.A, (2022), “The influence of government expenditure on economic growth in Ghana: An ARDL approach”, Cogent Economics and Finance, 10(1), 1-16.
[48] Qadri, FS, and Waheed, A, (2013), “Human capital and economic growth: cross-country evidence from low-, middle-and high-income countries”, Progress in Development Studies, 13(2), 89-104.
[49] Qaisar, A, (2001), “Endogeneous growth and human capital: A comparative study of Pakistan and Sri Lanka”, The Pakistan Development Review, 40(4), 987-1007.
[50] Raiser, M (1997), “Informal institutions, social capital and economic transition: reflections on a neglected dimension”, Working Papers 25, European Bank for Reconstruction and Development, Office of the Chief Economist.
[51] Reuveny, R, and Li, Q, (2003), “Economic openness, democracy, and income inequality: An empirical analysis”, Comparative Political Studies. 36(5), 575-601.
[52] Rodrik, D, Subramanian, A, and Trebbi, F, (2004), “Institutions rule: The primacy of institutions over geography and integration in economic development”, Journal of Economic Growth, 9(2), 131-165.
[53] Romele, M.A.L, (2013), “Human capital development and economic growth in Latvia”, European Scientific Journal, 9, 53-63.
[54] Romer, P, (1986), “Increasing returns and long-run growth”, Journal of Political Economy, 94, 1002-1037.
[55] Shaban, A, and Shahbaz Khan, S (2023), “Cultural diversity, human capital, and regional economic growth in India”, Regional Science Policy and Practice, 15(5), 973-991.
[56] Shleifer, A, and Vishny, R, (1993), “Corruption,” The Quarterly Journal of Economics, 108(3), 599-617.
[57] Solow, R. (1956), “A contribution to the theory of economic growth”, The Quarterly Journal of Economics, 70, 65-94.
[58] Tang, Y, and Zhang, K.H (2016), “Absorptive capacity and benefits from FDI: Evidence from Chinese manufactured exports”, International Review of Economics and Finance, 42, 423-429.
[59] Tavares, J, and Wacziarg, R., (2001), “How democracy affects growth”, European Economic Review, 45(8), 1341-1378.
[60] Teixeira, A., and Queiros, A.S, (2016), “Economic growth, human capital and structural change: a dynamic panel data analysis”, Research Policy, 45(8), 1636-1648.
[61] Uberti, L.J, and Knutsen, C.H, (2021), “Institutions, Human Capital and Economic Growth,” Springer Books, in Elodie Douarin and Oleh Havrylyshyn (ed.), The Palgrave Handbook of Comparative Economics, edition 1, chapter 18, pages 461-492, Springer.
[62] Uddin, M.A, Ali, M.H, and Masih, M (2021), “Institutions, human capital and economic growth in developing countries”, Studies in Economics and Finance, 38(2), 361-383.
[63] World Bank (2024), World Development Indicators, World Bank, Washington DC.
[64] World Bank, (2018), “The human capital project in Africa: Stories of progress”, Washington, DC: World Bank Group.

Keywords:

Institutions, Human Capital, Economic Growth.