An Extension of the Solow Growth Model That Includes Human

Essay

An extension of the Solow growth model that includes human capital in addition to
physical capital, suggests that investment in human capital (education)will increase the
wealth of a nation (per capita income).To test this hypothesis, you collect data for 104
countries and perform the following regression: $$\begin{array} { l } \widehat { \text { RelPersInc } } = 0.046 - 5.869 \times \text { gpop } + 0.738 \times s _ { K } + 0.055 \times \text { Educ, } R ^ { 2 } = 0.775 , \text { SER } = 0.1377 \\\begin{array} { l l l l } &&&&&( 0.079 ) & ( 2.238 ) &&&& ( 0.294 ) & &&( 0.010 )\end{array} \\\end{array}$$ where RelPersInc is GDP per worker relative to the United States, gpop is the average
population growth rate, 1980 to1990, sK is the average investment share of GDP from
1960 to1990, and Educ is the average educational attainment in years for 1985.Numbers
in parentheses are for heteroskedasticity-robust standard errors.
(a)Interpret the results and indicate whether or not the coefficients are significantly different
from zero.Do the coefficients have the expected sign?