Trade, Human Capital and Economic Growth in BRICS and EU Economies

Negem, Seham H; Bhattarai, Keshab

Abstract

This paper examines the impact of both trade and human capital on economic growth of the European Union and BRICS. Over the period 2010-2020, the estimated model is based on endogenous growth theory. Our theoretical model is estimated for the EU and BRICS economies using error correction approach since cointegration is detected. Despite using only one equation, our econometric technique deals with simultaneity problem created by the interdependence of variables. Data from 28 EU and 5 BRICS countries are pooled for the period of analysis. There is no contradiction in the empirical results for the BRICs and EU economies. They show existence of significant bi-directional relationship running from real exports (X) with positive coefficient, real imports (M) with negative coefficient and human capital (HK), represented by secondary school enrolment, with positive coefficient to economic growth, represented by real GDP per capita, in both short run and long run (but not for M in the long run for BRICS); confirming a robust causation among these four variables. Another bi-directional correlation appears between real exports (X) and human capital (HK) for the EU. For the BRICS, however, a unidirectional causation running from human capital (HK) to real exports (X) has been detected as well as a unidirectional causality running from real imports (M) to human capital (HK).

Citation

Negem, S. H., & Bhattarai, K. (in press). Trade, Human Capital and Economic Growth in BRICS and EU Economies. Journal of Development Economics and Finance, 3(1), 21-46

• Journal Article Type: Article
• Acceptance Date: Apr 13, 2022
• Online Publication Date: Jun 3, 2022
• Deposit Date: Apr 27, 2022
• Publicly Available Date: Jun 6, 2022
• Journal: Journal of Development Economics and Finance
• Electronic ISSN: 2582-5194
• Publisher: ARF India
• Peer Reviewed: Peer Reviewed
• Volume: 3
• Issue: 1
• Pages: 21-46
• Keywords: BRICS; EU; Economic Growth; Human Capital; Trade; Causality test; Unit Root test; Cointegration test; Vector Error Correction Model
• Public URL: https://hull-repository.worktribe.com/output/3984624
• Publisher URL: https://www.arfjournals.com/jdef/issue/152