The Effect of Increasing Human Capital Investment on Economic Growth and Poverty : A Simulation Exercise
This paper examines the dynamic responses of income and poverty to increased investment in the human capital of new cohorts of workers, using a quantitative macroeconomic model with realistic demography. Compared to a baseline in which the rate of...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/786861537902769850/The-Effect-of-Increasing-Human-Capital-Investment-on-Economic-Growth-and-Poverty-A-Simulation-Exercise http://hdl.handle.net/10986/30463 |
| Summary: | This paper examines the dynamic
responses of income and poverty to increased investment in
the human capital of new cohorts of workers, using a
quantitative macroeconomic model with realistic demography.
Compared to a baseline in which the rate of human capital
investment currently observed in every country remains
constant, the paper examines two alternative scenarios: one
in which each country experiences a rate of growth of human
capital investment that is typical of what was observed in
the decade ending in 2015, and one in which each country
raises human capital investment at a rate corresponding to
the 75th percentile of what was observed in the data. In the
former, world GDP per capita is 5 percent higher than
baseline in the year 2050, while the global rate of $1.90
poverty is 0.7 percentage points lower in that year. In the
latter, world GDP per capita is 12 percent higher than
baseline in 2050, while the rate of $1.90 poverty drops by
1.4 percentage points. These gains are concentrated in poor
countries. The paper argues in the context of our model that
investing in people is more cost effective than investing in
physical capital as a means to achieve specified income or
poverty goals. |
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