The impact of human capital investments on productivity: Panel data analysis

With the globalization of the world economic structure, the quality of the work performed and the characteristics of the labor force change accordingly. Especially the developments in the communication, information and services sector, new business conditions and the resources that create these business conditions have brought new approaches to the preparation and use of human resources. In this study, the factors affecting human capital and productivity in all countries of the world between 1980 and 2017 have analyzed with the data. The relationship between human capital and productivity in econometric analysis has been examined. In addition, independent variables that affect labor productivity (health, openness, inflation, working hours, investment, direct investment) have been tried to be explained. Hausman test has been used in the analysis. Education, health, skills acquisition, economic income and development of living standards are directly related with the development of human capital investment. The aim of this study is to empirically examine the association between human capital investment and productivity in general and labor market sense. In the analyses, eight distinct productivity indicators and three human capital investment indicators are employed. Therefore twenty four models are estimated by utilizing unbalanced panel data. According to the estimation results there exists a strong and statistically significant positive relationship between human capital investment and productivity. In other words, human capital investment contributes to the improvement of productivity in an economy.