The role of openness and human capital on long run growth (an application of panel data for emerging markets)

There is common belief in the theoretical studies on economic growth that more open economies grow faster than the closed one. In addition, it is immensely pointed that investment in human capital also enhances economic growth. In contrast to the theoretical studies, in the empirical manner, there is no consensus among economists on the effects of openness and human capital on growth. Furthermore, a common definition of an openness indicator has long been discussed in the empirical literature on openness and growth. Thus, the relationship between openness and economic growth can not be accurately determined in cross-country studies. First of all, the Solow Model and Endogenous growth models are examined in this thesis. Secondly, the effect of trade on economic growth is also investigated. Finally, we analyzed dynamics of growth of emerging markets using techniques panel data econometrics. Using various openness indicators we find that the greater the openness the faster the economic growth. Moreover, despite its strong theoretical framework, we do not observe the statistically significant relationship between human capital and economic growth. Keywords: Growth Theories, The Relationship between Growth and Trade, Human Capital, Panel Data Econometrics.