Human Capital and Economic Growth in India, Indonesia, and Japan: A quantitative analysis, 1890-2000
© Bas van Leeuwen, 2007. ISBN 978-90-8891-003-6, 354 pp.
The analysis of endogenous economic growth may be subdivided into two broad streams of theories.
The main difference between these two groups rests on whether a country is at the technological frontier. In less developed countries (which are further from the technological frontier) technologies can be adopted from abroad (Lucasian growth). Hence, their human capital is used entirely to apply these technologies in the productive process. As a country develops further (approaches the technological frontier), it becomes increasingly difficult to adopt technologies from abroad and, therefore, more and more of its own human capital must be used to create new technologies (Romerian growth: R&D). The remaining human capital is used to apply these new technologies in the productive process.
From this perspective it is not surprising that Japan moved from Lucasian to Romerian growth in the mid-twentieth century.
India and Indonesia, however, remained dominated by Lucasian growth. Not only was their per capita stock of human capital much lower than in Japan, but it was also less efficient. In addition, these countries were disadvantaged by their late economic development. Technological development started to take place at the level of higher education, a level where these countries had a relative disadvantage compared to more developed countries.