Human capital investments spur economic growth and development
In recent decades, investments in human capital emerged as a catalyst for economic growth and development. The 20th century witnessed unprecedented advancements in education, health, social protection, and nutrition. However, significant disparities in human capital persist between rich and poor countries.
Understanding both the accumulation and use of human capital can help countries choose investments and policies to address their development challenges. In a new paperwe provide a systematic review of these processes and their implications for economic development. This paper shows that people’s productivity varies depending on the types of human capital investments they receive at different stages of life. Making the most of people’s skills is crucial for driving economic development.
Human capital accumulation
In broad terms, human capital consists of good health, knowledge, and skills. It encompasses cognitive skills, socio-emotional skills, personality traits, and cultural knowledge. Importantly, human capital accumulation starts before birth and continues throughout the life cycle, from early childhood to late adulthood, through various means beyond formal education.
At all life stages, people in developing countries face significantly larger barriers compared to their counterparts in rich countries. These barriers contribute to the wide cross-country gaps we see in income and productivity.
Figure 1: Human capital accumulates over the life cycle