The Role of Human Capital and Technological Interdependence in Growth and Convergence Processes: International Evidence

Abstract

This paper develops a bisectorial growth model with physical and human capital accumulation. Each sector is characterized by a different technology involving different human capital parameters. The model includes human capital externalities together with technological interdependence between economies. It leads to a spatial autoregressive reduced form for the real income per worker at steady state. The structural parameters of the model are recovered and evidence of the insignificance of human capital in explaining per capita growth, that is the human capital puzzle, is reconsidered. In fact, the parameter related to human capital in the consumption good sector is low which is consistent with evidence presented in the growth accounting framework. In contrast it is indeed higher in the education sector. Our model leads to spatial econometric specifications which are estimated on a sample of 89 countries over the period 1960-1995 using maximum likelihood as well as Bayesian estimation methods, which are robust versus outliers and heteroskedasticity. This model yields a spatially augmented convergence equation characterized by parameter heterogeneity. A locally linear spatial autoregressive specification is then estimated providing a different convergence speed estimate for each country of the sample.Conditional convergence, technological interdependence, spatial autocorrelation, parameter heterogeneity, locally linear estimation