The impact of human capital on the financial development in the West African Economic and Monetary Union (WAEMU)

Abstract

This article studies the impact of human capital on financial development in the West African Economic and Monetary Union (UEMOA). The objective of this study is to show That human capital has a positive impact on economic growth by stimulating financial development. The most important aspect of human capital in our work refers to the knowledge and skills possessed by individuals and accumulated during schooling, and experiences and which are useful for the production of goods, services and new acquisitions. Using a panel VAR model for annual data from 1995 to 2013, our results show that a positive human capital shock promotes financial development. Indeed, the primary school enrollment rate and health expenditure significantly influence the development of the financial system in the union. However, the variance decomposition analysis shows that there is a weight of about 1% to 3% between the human capital variables. This in fact demonstrates that there is a link but which could be demonstrated by the quality of education and health. These results could also suggest that while the length of schooling is important for developing countries to catch up with advanced countries, it is on the other hand essential to invest in the quality of education to better express the link.

Keywords : Human capital, financial development, schooling rate, health expenditure, panel VAR

JEL Classification : J24 ; G1 ; R15

Paper type : Empirical research