Identifier

1127

Document Type

Discussion Paper

Date of Paper

1-2026

Abstract

Human capital is central to efforts to promote growth, convergence, and the elimination of poverty. Drawing on the seminal macroeconomic frameworks by Nelson-Phelps, Lucas and subsequent developments, alongside macro and microeconomic evidence, we examine the role of human capital in driving innovation and growth. We highlight how different types of human capital, characterized by education level, matter in different stages of development. Despite documented increases in years of schooling, the world’s poorest regions still see stagnating outcomes in learning and education quality, potentially creating poverty traps where investments in neither physical nor human capital materialize. We discuss obstacles to human capital accumulation through a simple analytical framework and present evidence from randomized interventions spanning early childhood programs to school-age initiatives, assessing policies that can effectively remove barriers to skill acquisition and establish foundations for sustained growth.

Acknowledgements

Prepared for the Handbook of Development Economics, 6th edition. We thank the editors of the Handbook, Pascaline Dupas, Pinelopi Goldberg, and Rohini Pande, for their comments and guidance; Martin Rotemberg for his detailed discussion at the Yale conference for the Handbook; Gabriel Demombynes for his detailed comments while discussing it at a World Bank presentation and Steven Pennings for following up from the presentation with important insights. We also thank Mark Rosenzweig for long discussions and valuable insights on the role of human capital in growth both over the years and with the opportunity of this chapter. Alexander Bjerck Hagen from the Norwegian School of Economics and Sarah Lepkowitz and Vivian Kaleta funded by the Tobin RA program at Yale, provided excellent research assistance. Raphaëlle Soffe provided detailed comments and insights for which we are grateful. Costas Meghir thanks the Cowles foundation and the ISPS for funding. All errors and interpretations are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

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