Human Capital – Growth Nexus: The Role of Skill Mismatch

Abstract

Economics is a branch of social science that touches upon many aspects of our lives and has important effects on the well-being of all people. Within economics, human well-being is significantly contingent on the process of growth. Production takes place via a combination of human and physical capital; therefore, human capital is expected to be a main contributor to economic growth. However, many studies have failed to uncover a significant association between human capital and growth, and others have found only marginal contributions therein. Several economists have tried to explain this paradox. This study brings forth skill mismatch as another potential explanation of the weak relationship between education and growth, and shows that skill mismatch can nullify the potential advantage of increased human capital. Most countries have failed to take skill mismatch seriously; therefore, there is no systematic data on the indicators that relate to it. This paper emphasizes the need for reliable and sufficient data on the indicators of skill mismatch, so that planning for the better utilization of human capital can take place.