An Extension of the Solow Growth Model That Includes Human

question 48

Essay

An extension of the Solow growth model that includes human capital in addition to
physical capital, suggests that investment in human capital (education)will increase the
wealth of a nation (per capita income).To test this hypothesis, you collect data for 104
countries and perform the following regression: $$\begin{array} { l } \widehat { \text { RelPersInc } } = 0.046 - 5.869 \times \text { gpop } + 0.738 \times s _ { K } + 0.055 \times \text { Educ, } R ^ { 2 } = 0.775 , \text { SER } = 0.1377 \\\begin{array} { l l l l } &&&&&( 0.079 ) & ( 2.238 ) &&&& ( 0.294 ) & &&( 0.010 )\end{array} \\\end{array}$$ where RelPersInc is GDP per worker relative to the United States, gpop is the average
population growth rate, 1980 to1990, sK is the average investment share of GDP from
1960 to1990, and Educ is the average educational attainment in years for 1985.Numbers
in parentheses are for heteroskedasticity-robust standard errors.
(a)Interpret the results and indicate whether or not the coefficients are significantly different
from zero.Do the coefficients have the expected sign?

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Definitions:

North Korea

A country in East Asia, officially known as the Democratic People's Republic of Korea, known for its authoritative government and isolation from most of the world.

South Korean

Pertaining to South Korea, its people, culture, or characteristics.

Middle Childhood

A developmental stage typically referring to children aged 6-12 years, characterized by significant growth in cognitive, social, and physical abilities.

Social Intelligence

The capacity to understand and manage interpersonal relationships and navigate social environments.