In what ways does human capital influence the relationship between financial development and economic growth?

Abstract

PurposeHuman capital is a portfolio of rich skills that the labour possesses. Human capital has attracted significant attention from scholars. Nevertheless, empirical findings on the utility of human capital have often been divided. To address the research gap in the literature, the authors attempt to understand how human capital plays a significant role in financial development and economic growth nexus.Design/methodology/approachThe authors rely on secondary data published by the World Bank. The authors use econometric tools such as the autoregressive distributive lag (ARDL) model and related statistical tests to study the relationship between human capital, India's financial growth and gross domestic product (GDP) growth.FindingsStudy findings suggest that human capital and financial development contribute significantly to economic growth. Further, the authors found that human capital has a positive and significant moderating effect on the path of joining financial development and economic growth.Practical implicationsThe study contributes to the human capital debate. Despite the rich body of literature, the study based on World Bank data confirms the previous findings that investment in human capital is always useful for the financial and economic growth of the nation.Originality/valueThis paper reveals some unique findings regarding effect of financial development and economic growth nexus which opens the window of new dimension to think about their nexus. It also provides a different pathway to foster the economic growth by using human capital and financial development as together, especially in India.

Moderator Effect of Technological Advancement on Financial Development and Economic Growth Nexus in Asian Countries

“…Furthermore, one school of scholars explains that human capital positively contributes to EG (Saroj et al, 2023;Rahaman et al, 2022). Moreover, Nguyen (2022) confirms the positive relationship between HC and EG in transition countries, while Hashani et al (2022) stress that HC positively affects EG in Western Balkan countries.…”

Does national intellectual capital matter for economic growth in the Asia–Pacific economies?

“…Economic growth and development is a complex and multifaceted process, and a myopic focus on the short-term findings may obscure the enduring impact of intellectual capital on sustained economic progress. Previous studies such as Chaudhry et al (2023) and Saroj et al (2023) identify the factors influencing economic growth. These authors consider that various factors should be examined to accommodate their intricate dynamics, cumulative effects, institutional influences, and the transition towards economic systems.…”

“…Previous studies such as Chaudhry et al. (2023) and Saroj et al. (2023) identify the factors influencing economic growth.…”

The Impact of Labour, Wage, and Human Development Index on Economic Growth

“…Human capital like knowledge and skills boosts output, innovation, and technology, boosting economic growth. Human capital may promote resource efficiency, innovation, and technological advancement to facilitate economic growth (Asongu & Odhiambo, 2020;Lutfi et al, 2023;Saroj et al, 2023). Also, changes in the labour market, occupations, and worker characteristics might cause wage inequality .…”

“…In '90, the United Nations Development Programme (UNDP) developed this index to emphasize the importance of resources in development. HDI describes the population level that can be facilitated from the results of development by obtaining income, health, education, and so on (Saroj et al, 2023). HDI is formed based on three indicators: longevity, knowledge, and decent living standards (Bagianto et al, 2020).…”