Investigating the Effects of Human Capital Development on Economic Growth in selected Developing and Developed Countries

Abstract

The rate of economic growth has declined in many countries, and this has been partly attributed to poor human capital development and these challenges are more pronounced in developing economies where human capital remains relatively low. This study analyses the effect of human capital development in selected developed and developing countries. Pre-estimation tests was conducted and Feasible generalised least squares within the periods of 2000-2024 was used for the variables, panel data that covered 15 and 18 randomly selected developed and developing countries. According to the findings human capital development exerts a positive and statistically significant effect on economic growth in both developed and developing countries. In developed economies, the coefficients are 4.508 (CCEMG, p < 0.05) and 12.317 (FGLS, p < 0.01), while developing countries record 1.692 and 5.795 (p < 0.01). Descriptive evidence shows large structural gaps, with mean GDP per capita of 38,562.40 in developed countries compared to 574.57 in developing economies, and average human capital indices of 0.885 and 0.65, respectively. Based on the findings, this study concluded that that improvements in human capital significantly enhance GDP per capita. As a result, for developed countries governments must strengthen investments in human capital and health systems to sustain high productivity and long-term economic growth while developing countries, priority should be given to improving both the quantity and quality of investments in education and healthcare, while enhancing the efficiency and effectiveness of public spending through stronger institutions and governance.