Institutional quality mediates the effect of human capital on economic performance

Jonathon Adams-Kane and Jamus Lim

No 6792, Policy Research Working Paper Series from The World Bank

Abstract: This paper considers the relationship between institutional quality, educational outcomes, and economic performance. More specifically, it seeks to establish the linkages by which government effectiveness affects per capita income, via its mediating effect on human capital formation. The empirical approach adopts a two-stage strategy that estimates national-level educational production functions that include government effectiveness as a covariate, and then uses these estimates as instruments for human capital in cross-country regressions of per capita income. The results identify a significant and positive effect of human capital on per capita income levels, and partially resolves the inconsistency between macro- and micro-level studies of the effect of human capital on income. The results also remain robust to alternative specifications, extension to a panel setting, subsamples of the data, and fully endogenous institutions.

Keywords: Economic Theory&Research; Governance Indicators; Emerging Markets; National Governance; Debt Markets (search for similar items in EconPapers)
Date: 2014-02-01
New Economics Papers: this item is included in nep-gro and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... ered/PDF/WPS6792.pdf (application/pdf)

Related works:
Journal Article: Institutional Quality Mediates the Effect of Human Capital on Economic Performance (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:6792

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi (ryazigi@worldbank.org).