Assessing the Impact of Human Capital on Economic Growth: A Dual Approach Using Quantity and Quality Proxies

This study explores the long- and short-run effects of human capital on economic growth across 27 European Union countries between 1980 and 2024, using a panel ARDL–PMG framework. It distinguishes between the quantity and quality dimensions of education, evaluating their respective contributions to GDP growth.

The findings indicate a statistically significant and robust long-run relationship among the selected variables, as confirmed by the negative and highly significant error correction term (–0.3176, p < 0.01). Cognitive skills, proxied by PISA mathematics scores, exhibit a positive and significant effect on long-run economic growth, reinforcing the idea that education quality is a stronger growth driver than traditional quantity-based indicators.

In contrast, variables such as tertiary education expenditure and enrollment show no significant impact in the long run, suggesting that increasing access or funding alone may not yield sustained economic benefits without improving learning outcomes. However, these same indicators are positively associated with short-run growth, highlighting their role in generating immediate positive effects through enhanced human capital utilization.

Gross fixed capital formation (GFCF) remains a key short-run driver of growth, while other labor force variables show no significant effects in either time horizon. These findings emphasize the importance of focusing policy efforts on improving the effectiveness and outcomes of educational systems, rather than expanding inputs alone.

Overall, the study provides empirical support for shifting from a quantity-based to a quality-focused human capital development strategy, offering valuable insights for policymakers aiming to enhance long-term economic performance in the EU context.

JEL classification: I25, J24, O47, O15, C23