The long-run Relationship between Human Capital and Economic Growth in Sweden

The relationship between education and economic growth has been one of the fundamental themes of economic analysis. Despite the growing interest in the relationship between growth and education, and despite the strong theoretical foundations for a key role of education/human capital in economic growth, the empirical evidences, particularly those using causality analyses, are fragile at best. By utilizing the recently developed series of human capital, this paper examined the causal relationship between human capital and economic growth for Sweden over the period 1870-2000. The result from the Granger causality test shows that there is bidirectional causality running from human capital to output per worker and vice versa. Moreover, using vector error correction model, the paper shows that human capital has a significant positive impact on economic growth in Sweden.