Differences in Human Capital across Countries

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Differences in education and skills certainly help to explain some of the differences among countries. Researchers have found evidence that measures of educational performance are correlated with GDP per person. The causality almost certainly runs in both directions: education levels are low in Niger because the country is so poor, and the country is poor because education is low.

We can include measures of education and training in an attempt to measure the skills of the workforce. In fact, economists Robert Hall and Chad Jones have constructed a measure that allows us to compare the amount of human capital in different countries. [***To estimate relative human capital levels in different countries, we use the figures in Robert Hall and Chad Jones, “Why Do Some Countries Produce So Much More Output per Worker Than Others?” Quarterly Journal of Economics 114, no. 1 (1999): 83–116. ***]In ***Table 6.4 "Real GDP in 2003 in the United States, India, and Niger if All Three Countries Had the Same Workforce, Physical Capital Stock, and Human Capital Stock", we bring the human capital level in India and Niger up to the level in the United States and, as before, suppose that all three countries have the same amount of labor and physical capital. Real GDP in India would climb to about $5.2 trillion, or a little over half the level in United States. Niger’s real GDP would equal about $2.8 trillion, meaning the increased human capital would more than double Niger’s GDP. However, real GDP in the United States would still be more than three times greater than that of Niger.

Table 6.4 Real GDP in 2003 in the United States, India, and Niger if All Three Countries Had the Same Workforce, Physical Capital Stock, and Human Capital Stock