In this chapter, we will discuss human capital investments and the role of human capital in economic growth and in cross-country income differences.

As already discussed in Chapter 3, human capital can play a major role in economic growth and cross-country income differences, and our main purpose is to understand which factors affect human capital investments and how these influence the process of economic growth and economic development.

Human capital refers to all the attributes of workers that potentially increase their productivity in all or some productive tasks. The term is coined because much of these attributes are accumulated by workers through investments. Human capital theory, developed primarily by Becker (1965) and Mincer (1974), is about the role of human capital in the production process and about the incentives to invest in skills, including pre-labor market investments, in form of schooling, and on-the-job investments, in the form of training. It would not be an exaggeration to say that this theory is the basis of much of labor economics and plays an equally important role in macroeconomics. The literature on education and other types of human capital investments is vast, so only parts of this literature that are relevant to the main focus of this book will be covered here. There are a number of other important connections between human capital and economic growth, especially related to its effect on technological progress and its role in economic takeoff, which are not covered in this chapter, but will be discussed later in the book.

10.1.

More on the topic In this chapter, we will discuss human capital investments and the role of human capital in economic growth and in cross-country income differences.: