Human Capital and Economic Growth Relationship: A Causality Analysis for Turkey

Human capital has started to find its place in the growth literature as one of the sources of economic growth since the late 1980s. Increase in human capital accelerates growth by increasing capital investment rate. Human capital is an important factor, especially in the case of performing development by ensuring sustainable growth in developing countries such as Turkey. In this study, the relationship between human capital and growth is empirically assessed for Turkey. In the study, the causality relationship between gross domestic product (GDP) and the human capital is investigated for the period of 1998: Q1 and 2016: Q2. In the model, the variables representing human capital are education expenditures and expenditures on education and professional, scientific and technical activities. The results of the analysis show that there is a bidirectional causal relationship between GDP and the expenditures on professional, scientific and technical activities, while there is a one-way causal relationship between GDP and education expenditures. In this context, it can be argued that education expenditures and more generally increasing the quality of human capital in Turkey is important and have a positive impact on economic growth