Domestic saving and human capital formation in Sub-Saharan Africa

Wyse, Zachary

Domestic saving and human capital formation in Sub-Saharan Africa

Persistent URL

https://hdl.handle.net/10456/59147

Author(s)

Wyse, Zachary

Date Issued

April 22, 2025

Abstract

Human capital formation is an essential channel for sustained economic growth. Relative to other developing regions of the world, Sub-Saharan Africa (SSA) has been unsuccessful in achieving growth in its human capital. My primary objective in this paper is to determine if domestic savings influence SSA’s human capital formation. Using four measures of human capital, Generalized Methods of Moments regressions, and panel data from 33 African countries between 2000 and 2022, I estimate the impact that savings have on human capital formation in SSA. The results demonstrate that the relationship between savings and human capital strongly depends on how human capital is measured. First, I find an inverted-U-shaped relationship between savings and internet usage (digital literacy). Second, I find a U-shaped relationship between savings and better health outcomes (lower infant mortality). For the two nonlinear relationships, I calculate optimal savings thresholds. Other explanatory variables that consistently have a significant impact on human capital include income inequality, economic growth, labor force participation, urbanization, and trade openness.

Major

Economics

First Reader(s)

Nonnenmacher, Tomas W.