Channels through Which Human Capital Inequality Influences Economic Growth

This paper empirically investigates the theoretical predictions of some of the channels through which human capital inequality may discourage investment and growth. In a cross section of countries over the period 1960-2000, findings reveal that, all other things being equal, a greater degree of human capital inequality increases fertility rates and reduces life expectancy, which in turn hampers the accumulation rates of human capital. This effect is reinforced in the countries where individuals find it difficult to access credit. Extensive sensitivity analyses show that the results are robust across specifications and are not driven by atypical observations, endogenous regressors, or unobservable heterogeneity.