The Impact of Human Capital Development on Economic Growth in Germany (1991-2018)

Abstract

This paper examined the impact of human capital development on economic growth in Germany from 1991 to 2018, using time series data from the World Bank Indicator and the National Bureau of Statistics. In Germany, the service industry accounts for up to 85% of total employment, with a heavy focus on education, research, the cultural and creative sectors as well as health services. Despite being shrunk since reunification, the public sector continues to account for the vast majority of employment. The health services industry, which employs over 180 000 people in Berlin, is the most significant economic sector. As the most common type of organization in the private sector, small and medium-sized firms account for 80% of total employment in Berlin. Berlin's social structure is characterized by a significant migrant population, which is reflected in its economy. The goal of this research was to investigate the link between human capital indices (education and health) and economic growth. The ordinary least square regression analysis is used in this study to examine the impact of human capital development on German economic growth from 1991 to 2018. The empirical findings show that human capital development has a significant impact on economic growth, as measured by GDP. According to theory, the human capital development indicators of secondary school enrollment, primary school enrollment, gross capital formation, total labor, gross domestic product and life expectancy have a positive and statistically significant run long impact on Germany’s economic growth, implying that these indicators are critical in achieving growth in the German economy in the long run.  Life expectancy and gross capital formation, on the other hand, have a positive and statistically significant impact on Germany's economic growth in the short run. According to the study, the German government should ensure that adequate resources are allocated for human capital development in order to boost economic growth in Germany.

Keywords: Human Capital, Economic growth, Gross Domestic Product (GDP) and Life expectancy

DOI: 10.7176/JESD/12-22-05

Publication date: November 30^th 2021