Revisiting the human capital-led growth hypothesis in Sub-Sahara Africa (SSA): The economic complexity perspective

Abstract

This study employs panel data from Sub-Saharan Africa between 1990 to 2022. The source of the data is the World Bank Development Indicator (WDI) data base. The idea that a country's growth is driven by human capital and the role of economic complexity that reflects a country's production capabilities is examined. The dynamic panel model estimators such as difference Generalised Method of Moments (GMM) and system GMM is adopted and discovers that the economic complexity dynamics in sub-Saharan Africa (SSA) do not have a significant impact on the region's growth. This means that, despite the idea that economic complexity leads to better knowledge and the ability to produce a variety of sophisticated products, it is actually a traditional measure of human capital, such as average years of schooling, which are more important for growth in SSA. That said, our results suggest that economic complexity can enhance the impact of both human and physical capital on growth. A framework that promotes the judicious combination of both human capital and physical capital as two forms of productivity enhancement to accelerate the economic growth process in the SSA is hereby recommended. This research further recommends the removal of bottlenecks in infrastructural development by paying more attention to factors such as economic complexity and institutional quality that are capable of fostering the development of both human and physical capital.

Keywords: Human capital; Economic complexity; Sub-Sahara Africa (SSA); GMM

JEL Code: J24, O11, C13

DOI: 10.7176/JESD/15-7-03

Publication date: September 30th 2024