IMPACT OF HUMAN CAPITAL ON EXPORT STRUCTURE IN SELECTED ARAB COUNTRIES (1970-2005)

Abstract

The concept of human capital refers to the value of the income-earning potential embodied in individuals. Sources of human capital formation include education, health, training, research, and migration. Different approaches used in the economic literature to measure the stock of human capital variable include income- and cost-based approaches, integrated income-cost-based approach, and education-based approach. Different approaches were followed to assess the contribution of human capital to trade pattern and export structure in fuvor of manufactures. Followed approaches comprised the use of"input­ outpt table", "revealed comparative advantage model", regression analysis, and technological ladder. Some studies indicated the validity ofHeckscher-Ohlin theory in explaining the structure of exports between manufactures and primary exports, i.e., a nation's export structure is determined by its endowment structure. However, some economists pointed out that policies played an important role in determining a country's exports structure. Data reveal that over the past few decades, Arab countries remained exporters of raw materials especially fuel, whereas exports of manufactures are of moderate value and concentrated in a narrow range of goods. In order to assess the impact of human capital on Arab's export structure, this study carried out a descriptive analysis on a panel of eight Arab countries over the time span 1970-2005, at five-year intervals. These countries were selected on the basis of availability of Barro and Lee measures of human capital and data on manufactured exports computed based on the Standard International Trade Classification (SITC}. Policies regarding education, research and development, industrial development, investment, and trade adopted by Arab countries are analyzed, based on published data and empirical studies carried out to assess the effects of such policies on Arab export structure. It was found that although selected Arab countries sought to accumulate human capital, mainly through universal enrollment in education, contribution of human capital to export diversification in favor of manufactures is weak. Causes behind this situation lie in adopted public policies that affectt:d efficient human capital formation and utilization. It is suggested that succeeding in raising the share of manufactures in total merchandise exports requires the adoption of sound policies for the Jhrmation and utilization of human capital