Determinants of Human Capital: An Empirical Analysis Using System GMM

Abstract

This paper examines the key factors shaping human capital in OECD countries, highlighting its multidimensional nature and the interplay between economic, educational, health, and social influences. Covering the period 2000–2024, the study applies the System GMM approach to account for persistence, endogeneity, and country-specific characteristics. Human capital is measured using two indicators – the Human Capital Index and life expectancy – while determinants are grouped into four categories: economic, educational, health-related, and social factors. The results show that economic, educational, and social conditions jointly shape human capital and life expectancy. Economic growth is positively associated with health outcomes, while fiscal variables display limited immediate effects. Education is a key driver, as increases in upper-secondary attainment and a more advanced-educated labor force significantly strengthens human capital. Health expenditure shows mixed results, pointing to possible efficiency issues. Among social factors, female labor force participation consistently improves both human capital and life expectancy, whereas remittances, corruption, and R&D expenditure have weak or context-dependent effects, suggesting that institutional quality and household structure condition their impact. By adopting a multidimensional and dynamic framework, this paper demonstrates that sustainable human capital formation requires integrated policies that simultaneously promote education, health, gender inclusion, and innovation.