The Mystery of Human Capital as Engine of Growth, or Why the US Became the Economic Superpower in the 20th Century

Abstract

This paper offers a thesis explaining why the United States surpassed the United Kingdom and other European countries in the 20th century in terms of aggregate GDP and GDP per capita, as a case study of recent endogenous growth models in which human capital is the “engine of growth”. The conjecture is that the United States' rise to economic superpower is largely due to relatively faster formation of human capital. The foundations of the thesis are evaluated through stylized facts that indicate that, compared to other countries in the Organization for Economic Cooperation and Development (OECD), the United States achieved superior educational achievements in terms of its adult population during the twentieth century, especially at the secondary and tertiary levels. Although human capital is viewed as a direct facilitator of growth, the underlying factors that drive the superiority of the United States are related to the superior returns that the North American political-economic system has offered to date to individual human capital achievements, both internal as well as imported.

JEL classification: H1 ; I2 ; N1 ; N3 ; O0 ; O4