The effect of human capital on economic growth: The case of Turkey 1960-2005

Starting with the late 1950s, the theory of economic growth began focusing on therole of human capital as a determinant of economic development. This thesis examines theexogenous and endogenous theories of growth in relation to the economic growthperformance of Turkey between the years 1960 and 2005. During this period, the real GDPper worker in Turkey grew on average by 3.05 percent per annum. A simple growthaccounting exercise indicates that 44 percent of this growth in output was due to anincrease in physical capital and 15 percent in human capital. The share of TFP, on the otherhand, which can also be interpreted as the change in output that cannot be explained bychanges in physical and human capital, was 40 percent. The time series analysis in thisthesis uses two human capital proxies, namely education and health. Education is measuredas lagged high school and university enrollment ratios and health is proxied by the averagelife expectancy at birth. The econometric analysis uses ARDL methodology and therobustness check of the coefficient estimates are done via Johansen and Juselius technique.High school education has higher long-run elasticity than university level education in theexogenous model, supporting the fact that Turkey is a technology adopting country ratherthan an innovator. University education also significantly and positively affects economicgrowth and has a higher share in the endogenous model, pointing out the importance ofadvanced skill formation in technological progress. In the empirical analysis, health wasnot found to be a significant determinant of the economic development of Turkey.