Age-structured Human Capital Dynamics and Economic Growth: A Note on Interdependence, Coordination and Welfare

In this chapter, we critically review the role of age-structured human capital in economic growth in the space-time domain and suggest (i) a theoretical framework for modeling growth interdependence across countries due to cross-country human capital accumulation and (ii) construct an empirical test for dynamic spatial growth correlations. Although (aggregate) human capital has been widely held as the engine of modern economic growth, the importance of age-structured human capital in growth generation is now recognized as inherently dynamic and that it unravels more about the explicit role of demographic process than its aggregate counterpart. Some cross-country studies using both aggregate and age-structured human capital have already depicted patterns that shows positive effect of human capital in economic growth. The main findings of this research are: cooperation in human capital accumulation policy across countries is welfare improving and that a dynamic correlation among countries growth processes exists which occur due to human capital accumulation differentials among them. We examine the case of four geographically clustered set of countries for empirical illustration.