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Do human capital development and innovation matter in sustaining economic development? Panel data evidence from selected developing economies

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  • Megha Agarwalla
  • Tarak Nath Sahu

Abstract

The study investigates the impact of human capital development and innovation on the economic development of 54 developing economies between the time frame 2000 and 2021. Human capital development is viewed here from the two viewpoints: health and education. Empirical results using the panel vector autoregressive model found that government health and education expenditure accelerates the economic progress while tertiary school enrollment impedes it in the short‐run. Innovation creates a favorable situation in the economy by means of the application of eco‐friendly technology. Moreover, unemployment surges and inflation dampens the developmental level. From panel causality test, feedback causality is found of economic development with the innovation and unemployment. Finally, impulse response function is employed for the robustness of the result. These empirical insights have a significant value in formulating policies that can encourage the innovation and prioritize the formation of human capital through the provision of education and healthcare facilities for enhancing the overall economic activities.

Suggested Citation

  • Megha Agarwalla & Tarak Nath Sahu, 2024. "Do human capital development and innovation matter in sustaining economic development? Panel data evidence from selected developing economies," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(6), pages 6864-6880, December.
    • Handle: RePEc:wly:sustdv:v:32:y:2024:i:6:p:6864-6880
    DOI: 10.1002/sd.3059
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