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Human Capital Spending, Inequality, and Growth in Middle-Income Asia

Author

Listed:
  • Abrigo, Michael R.M.

    (Philippine Institute for Development Studies)

  • Lee, Sang-Hyop

    (University of Hawaii at Manoa)

  • Park , Donghyun

    (Asian Development Bank)

Abstract

Asia’s rapid population aging fortifies the case for strengthening human capital investments. Further, the experience of the newly industrialized economies suggests that human capital investments will be a vital ingredient of the transition from middle income to high income. Those investments can also affect equity and public finances. In this paper, we use data from the National Transfer Accounts to empirically analyze the effect of human capital investment in Asian countries on economic growth, inequality, and fiscal balance. Our empirical evidence suggests that human capital investments have a positive effect on labor productivity and, hence, output. The positive effect is stronger for poorer households and, hence, beneficial for equity. We also find that such investments can generate sufficient tax revenues to improve the fiscal balance. Overall, our evidence points to a positive effect of human capital on growth, equity, and fiscal balance in Asia.

Suggested Citation

  • Abrigo, Michael R.M. & Lee, Sang-Hyop & Park , Donghyun, 2017. "Human Capital Spending, Inequality, and Growth in Middle-Income Asia," ADB Economics Working Paper Series 529, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0529
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    References listed on IDEAS

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    1. Rosario G. Manasan & Janet S. Cuenca & Eden C. Villanueva, 2007. "Benefit Incidence of Public Spending on Education in the Philippines," Governance Working Papers 21930, East Asian Bureau of Economic Research.
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    4. Mason, Andrew & Lee, Ronald & Jiang, Jennifer Xue, 2016. "Demographic dividends, human capital, and saving," The Journal of the Economics of Ageing, Elsevier, vol. 7(C), pages 106-122.
    5. Robert L. Clark & Naohiro Ogawa & Andrew Mason (ed.), 2007. "Population Aging, Intergenerational Transfers and the Macroeconomy," Books, Edward Elgar Publishing, number 12608.
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    7. Eirene P. Mesa, 2007. "Measuring Education Inequality In the Philippines," UP School of Economics Discussion Papers 200704, University of the Philippines School of Economics.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Asia; fiscal balance; growth; human capital; inequality;
    All these keywords.

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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