We study the relationship between human capital and growth using a model which encompasses previous specifications and estimates the short and the long-run effects of human capital accumulation. We adopt an empirical framework which accounts for countries’ heterogeneity and cross-sectional dependence in a dynamic panel. Results for a sample of 14 Asian countries reveal a large and positive long-run impact of human capital on growth in the 1960–2013 period. Looking at different types of education we find that the diffusion of primary and secondary education has a positive long-run impact, while the long-run effect of tertiary education is negative. Low proportion of people educated at the tertiary level, lack of opportunities for highly educated workers and the brain drain phenomenon could explain this result. These results support policies directed towards increasing investments in primary and secondary education rather than focusing on a minority educated at the tertiary level.

This study looks at the three-way relationship between economic growth, human development, and openness to trade in a large panel of developing Asian economies. Using a theoretically motivated simultaneous equations system, we find that although human development contributes positively to economic growth, in the case of our Asian sample growth does not appear to have had a positive influence on human development. Uneven growth accompanied by lagging institutional development, preventing human capital formation, might have inhibited human development in the short to medium run. Complementary to the literature showing that growth is sustainable only when accompanied by human development, we confirm a role for trade liberalisation policies in achieving higher growth as well as human development.