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Investments In Human Capital Development And Wages: Relationships And Problems In Lower-Middle-Income Countries

Author

Listed:
  • Myroslava Olievska

    (Military Institute of Taras Shevchenko National University of Kyiv, Ukraine)

  • Arthur Romanov

    (Academician Stepan Demianchuk International University of Economics and Humanities, Ukraine)

Abstract

The purposes of the article are to assess the impact of financing of education and health to human capital development, to consider the relationship among wages and investment in human capital, to establish directions of improvement of the investments in human capital development in Ukraine and other lower-middle-income countries. Methodology. Methodological basis of the research is the study of the dynamics of such indicators as the Human Capital Index 2020, wages, GNI per capita, education expenditure, government expenditure, financing of health, the wages of full-time employees. To solve the problems arising from the purpose of the study, systemic method (when analyzing the relationship of the investments in human capital development and wages), statistical methods of comparisons, economic analysis (when processing statistics), historical method (in the study of the evolution of Human Capital Index, expenditures on health and education), empirical and correlation-regression analysis (in the analysis of the practice of investments in human capital development) have been used. Results. The human capital is a central driver of sustainable growth and poverty reduction. The article proves that high-income countries can better finance the development of human capital; they are the leaders of the Ukraine Index 2020, more human capital in high-income countries is associated with higher earnings for people, higher income for countries, and stronger cohesion in societies. At the same time, the article substantiates that the low level of GNI per capita (3370 USD in Ukraine) and insufficient level of education and health expenditure negatively affect formation of human capital (the 53rd place in the Human Capital Index 2020). On the basis of the study of government and non-government expenditure on education and health, it has been concluded that investments in human capital are the effective tool to increase of the wages of full-time employees. Practical implications. Today human capital gains in many countries are at risk, especially in lower-middle-income countries. Features of the current socioeconomic situation require strengthening of investments in human capital development. The main steps that are necessary to undertake for implementing changes in the investments in human capital development have been determined in the article. They are the following: optimization of state financing of human capital; creation of fiscal space; creation of regional funds for financing human capital development; creation of strategic alliances and partnerships; supporting the demand for education and health care from households. Value/originality. The relationships between investments in human capital development and wages in the lower-middle-income countries are analytically proved. The complex of actions on optimization of financing of human capital has been generalized.

Suggested Citation

  • Myroslava Olievska & Arthur Romanov, 2021. "Investments In Human Capital Development And Wages: Relationships And Problems In Lower-Middle-Income Countries," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 7(1).
    • Handle: RePEc:bal:journl:2256-0742:2021:7:1:9
    DOI: 10.30525/2256-0742/2021-7-1-77-83
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    References listed on IDEAS

    as
    1. Christian Dustmann & Costas Meghir, 2005. "Wages, Experience and Seniority," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 77-108.
    2. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66(4), pages 281-281.
    3. Berthold Herrendorf & Todd Schoellman, 2018. "Wages, Human Capital, and Barriers to Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 1-23, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    human capital; investments in human capital development; wages; lower-middle-income countries; expenditure on education; expenditure on health; public expenditure on education; public expenditure on health;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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