Global poverty and human capital using panel data

Abstract

The objective of this research is to analyze the relationship between poverty and humancapital at a global level for the period 1960-2015. Data from the World Bank’sWorld DevelopmetIndicators WDI and the Barro and Lee (2010) database were used. In order tomeet the proposed objective, an economic model has been developed in the panel that allowsus to know its incidence among the variables, poverty and human capital. The Pedroniand Westerlund cointegration test was applied to find equilibrium in the long or short termrespectively, then the cointegration vector was estimated for individual countries throughthe Ordinary Least Squares (DOLS) model, and for groups of countries that use a DynamicPanel with Least Squares (PDOLS) model. The results indicate the existence of a shorttermand long-term equilibrium for certain countries at the world level and by groups ofcountries. The strength of the cointegration vector is significant, although a negative relationshipwas found in some countries. Finally, the Granger causality test was performed, asignificant and unidirectional relationship of poverty to human capital was found, only forlow-income countries, for the rest of the countries no relevant result was found. As a policyimplication, it is recommended that the government promote education for low-incomeyouth to improve the productivity and competitiveness of human capital.