Integrated Analysis of Human and Physical Capital: Driving Forces of Economic Expansion in N11 Countries

Abstract

The aim of this study is to investigate the effect of human capital and physical capital on economic growth in N11 countries (Bangladesh, Egypt, Indonesia, Iran, Mexico, Pakistan, Philippines, Turkey, Korea, and Vietnam) from 1995 to 2022. We analyzed the effect of life expectancy, literacy rate, and gross fixed capital formation on real GDP. First, the unit root is used to check the unit root properties of variables. The long-run relationship between variables is examined through Pedroni cointegration test. For panel causality, this paper used Dumitrescu Panel causality test. Finally, the fully modified ordinary least square (FMOLS) and dynamic ordinary least square (DOLS) are applied to get the long run estimates. The results revealed the presence of cointegration in the model. The results showed that adult literacy rate and life expectancy at birth have a positive impact on real GDP per capita in long run. Gross fixed capital formation also has a favorable impact on economic growth in the sample region. This research will provide number of useful suggestions for policymaking. Based on the findings of research, it is suggested that N11 countries should improve their human and physical capital to improve economic growth of the economy.