Impact of Human Capital, Economic Globalisation and Innovation on Economic Growth: A Revisit

Abstract

<p>We observe the existence of a middle-income trap for upper-middle- and lower middle-income countries. Bayesian model averaging (BMA) analysis shows that education plays an enabling role in high-income countries in determining economic growth, whereas the full potential of education is not fully utilized in middle-income countries. Generalized method of moments (GMM) estimations show that the education coefficient is positive and significant for high-income and middle-income countries. This implies that education plays a decisive positive role in achieving economic growth and gives a path to escape from the middle-income trap. However, the education coefficient for middle-income countries is approximately half that of high-income countries. Therefore, the findings of this study call for additional investment and focused strategies relating to human capital endowments. With the help of the extended Cox regression analysis, the study shows that mean years of education, life-insurance and non-life insurance premiums significantly increased the transition speed to high-income and thus reduced the transition duration. Important innovation variables like labor productivity, internet usage, and scientific journal articles also increased the transition speed and reduced the transition duration. The time-dependent covariates of trade openness, foreign direct investment, high-technology exports, health spending, urbanization, and life insurance premiums also increased the transition speed and thus reduced the transition duration.</p> <p>Globalisation is a process of integrating the nations of the world. This study's primary aim is to analyze the spillover effects of globalization on economic growth for 158 countries from 1990–2019 using the spatial Durbin model (SDM). The spatial and time-fixed effects estimates based on the membership of cultural, political, social, linguistic, and historical groups and international trade agreements (CPSLHT) yield significant findings. Initial GDP per capita, labor force participation, economic globalization, health spending, poverty reduction, and labor productivity exhibit expected positive relationships and statistical significance. Rho (ρ) is negative and statistically significant in spatial and time-fixed effects models for economic growth, indicating significant related countries’ negative spillover effects. We find notable exogenous spatial effects in the CPSLHT-based spatial and time-fixed effects model. Labor force participation, economic globalization, urbanization, labor productivity, and the rule of law generate positive exogenous spatial effects on economic growth. However, inadequate health spending generates negative exogenous spillover effects on economic growth in related countries. The high age dependency ratio's spatial effect is positive and significant. The rise in the dependency of children and older persons who are often economically dependent on the active population also reduces warranted economic growth in related countries.</p> <p>This study examines the role of governance in transitioning from a middle-income status to a high-income status in 20 countries. Rules of law, corruption control, and regulatory quality play significant roles. Significant interactions among government effectiveness were observed in the post-transition period. The probit regression revealed that the interaction of low government effectiveness, low insurance, heavy reliance on agriculture, high fertility rates, high inflation, limited foreign investment, and excessive public debt posed obstacles to achieving high-income status. The weak rule of law, corruption control, and regulatory quality affected the failure of 42 upper-middle-income countries to reach a high-income level. </p> <p>Within the realm of high-income countries is a notable spectrum of income inequality, with certain nations positioned close to a predefined economic threshold while others within this cohort simultaneously embark on substantial and noteworthy economic growth. This research investigates the influence of critical factors on economic growth and the transition from lower-high- and middle-high-income to upper-high-income. Between 1990 and 2019, 25 out of 28 nations successfully advanced to upper-high-income levels. Several key factors contribute to overcoming the barriers associated with lower- or middle-high-income status. These factors encompass labor force participation, labor productivity, life expectancy, high tech exports, reduction in unemployment rates, age dependency ratio, and poverty. The regression discontinuity analysis reveals a positive impact on the experimental group as economic globalization surpasses the threshold of 78%, facilitating the achievement of upper high-income status.</p>