Human capital and economic growth in Japan: an application of time series analysis

Abstract

The cointegration and causality between human capital and economic growth in Japan is examined by applying Johansen's test of cointegration and Hsiao's version of the Granger causality method to the Japanese data for the period 1952–93. The Phillips-Perron (PP) tests reveal that the original series of GDP is not stationary; therefore, a first differencing is performed. It is found that there is a bidirectional causality between human capital and economic growth. The results basically confirm the hypothesis that an increase in human capital stock exerts positive effects on economic growth and vice versa.