Gender‐specific Human Capital, Openness and Growth: Exploring the Linkages for South Asia

• Author: Sushanta Mallick,Arusha Cooray,Nabamita Dutta
• DOI: http://doi.org/10.1111/rode.12072
• Published date: 01 February 2014
• Date: 01 February 2014

Gender-specific Human Capital, Openness and

Growth: Exploring the Linkages for South Asia

Arusha Cooray, Sushanta Mallick, and Nabamita Dutta*

Abstract

Using data covering 1970–2008 for South Asia, this study investigates the influence of human capital

disaggregated by gender, on economic growth. We use an extended version of the Solow growth model

with per capita gross domestic product (GDP) a function of the key variables, viz. physical capital accumu-

lation, human capital accumulation, trade openness and capital flows, fiscal policy and financial develop-

ment. The key contribution of this study is to show that openness when interacted with the human capital

stock disaggregated by gender, has differential impacts on economic growth. While the positive impact of

male secondary schooling captures the direct skill effect relative to primary schooling, the marginal influ-

ence of female primary/secondary schooling fails to show a positive impact on growth at higher levels of

openness. An implication stemming from this study is that educational opportunities for females at the sec-

ondary level should be increased for South Asia.

1. Introduction

Debate in the growth literature with regard to the determinants of growth has focused

on either factor accumulation or productivity growth. Endogenous growth models

have considered the impact of different types of factor accumulation including human

capital, and cross-country macroeconomic policy differences on economic growth.

However, the relative importance of human capital accumulation, disaggregated by

gender, has been given limited attention. This paper not only sheds light on this issue,

but also considers policy determinants of growth in South-Asia over the time period

1970–2008. These countries are highly heterogeneous, exhibiting different initial

conditions.

Empirical evidence for various growth theories have been mixed with no single

model accurately explaining aggregate growth across countries (Durlauf et al., 2008).

However, Durlauf et al. (2008) find strong evidence for macroeconomic policy effects

and a role for unexplained regional heterogeneity, as well as some evidence of param-

eter heterogeneity in the aggregate production function. Consequently, there is scope

for undertaking a regional exercise to explain growth differences across countries. We

examine specifically, how the human capital stock disaggregated by gender, affects

growth at different levels of openness. Although the literature investigates open-

economy growth models (see for example Mallick and Moore, 2008; Cieslik and

Tarsalewska, 2011, and the references therein), there is little evidence on the gender

dimensions of openness—a key focus of this paper.

* Cooray: University of Wollongong, Northfields Avenue, NSW 2522, Australia. Tel: +61-2-4221-4017; Fax:

+61+2+4221-3725; Email: arusha@uow.edu.au. Mallick: School of Business and Management, Queen Mary

University of London, Mile End Road, London E1 4NS, UK. Dutta: Department of Economics, College of

Business Administration, University of Wisconsin, La Crosse, USA. The authors thank an anonymous

referee for valuable suggestions.

Review of Development Economics, 18(1), 107–122, 2014

DOI:10.1111/rode.12072

© 2014 John Wiley & Sons Ltd

The importance of human capital in a country’s economic growth has been well

documented in the literature.1However, the female and male human capital stock

may exhibit differential effects on economic growth. This is supported by Barro

(2001) who finds that male and female primary schooling, and male and female sec-

ondary schooling have differential effects on economic growth. Barro (2001) shows

that the education of females at the primary level promotes growth indirectly through

a fall in the fertility rate while male primary schooling does not significantly affect

growth. Barro (2001) also finds that male secondary schooling affects growth posi-

tively through the absorption of new technologies. Female secondary education

however, does not positively influence growth. Given the increase in female human

capital stock exhibited by the South Asian region in the recent past, we disaggregate

the human capital stock by gender and investigate specifically, the interactive effects

of human capital stock (male and female) and openness on economic growth in South

Asia.

Evidence suggests that women’s share of the labor force is subject to greater vari-

ation owing to macroeconomic fluctuations and changes in macroeconomic policies

(see Çag˘atay and Ozler, 1995; Seguino, 2000). Given the incentive schemes provided

by the South Asian economies in the years following deregulation, to encourage

foreign direct investment (FDI), and the large proportion of females employed in

export oriented industries, there is reason to investigate the empirical links between

openness, the female human capital stock and economic growth. Although there is a

large volume of cross-country and country-specific empirical work undertaken on

openness and on the female labor force in the developing economies (Çag˘atay and

Ozler, 1995; Fontana and Wood, 2000; Ozler, 2000; Seguino, 2000), empirical work

with a region-specific focus is limited. This paper is the first detailed study on South

Asia investigating how openness (measured by FDI and exports based on principal

component analysis)2increases or decreases the impact of the female human capital

stock on economic growth.

The evidence presented in this study suggests that openness when interacted with

the human capital stock disaggregated by gender has differential impacts on growth.

While primary enrollment for both males and females fails to have a positive impact

on growth even at higher levels of openness, in most cases, secondary enrollment is

positive for males conditional on greater openness and negative for females condi-

tional on the same. Although we have used ordinary least squares (OLS) as a baseline

specification, we have estimated all the specifications within a panel regression frame-

work controlling for country and time fixed effects and endogeneity using the general-

ized method of moments (GMM) system.

The paper is organized as follows. Section 2 describes the empirical model and

data. Section 3 details the methodology. Section 4 discusses the empirical results.

Section 5 presents robustness tests and Section 6 summarizes the conclusions and dis-

cusses policy implications.

2. Analytical Framework and Data

We start with the Cobb–Douglas production function with constant returns to scale:

YAKLe

it io it it

HM HF Z

it it

=−

()

++

()

ααφφϕ

1121 (1)

where Yit is aggregate output, Aio total factor productivity, Kit the stock of physical

capital, and Lit the labor force in country iin period t. Human capital comprises two

108 Arusha Cooray, Sushanta Mallick, and Nabamita Dutta

© 2014 John Wiley & Sons Ltd