The impact of human capital, institutional quality, and innovation on the regional gross domestic product: panel data approach

BACKGROUND AND OBJECTIVES: Differences in the fundamental factors of production and technology are cited as the reason for the disparity in growth rates by primary research. Improving the quality of human capital through education, the quality of institutions such as the public policies and innovation play an important role in economic growth. Also, technological innovation creates circumstances for any region to extract more value from limited resources to support sustainable economic growth. In this study, the effect of human capital, institutional quality, and innovation are investigated on regional gross domestic product per capita in oilexporting countries. Moreover, the effect of institutional quality has been investigated on the regional gross domestic product through government consumption expenditures. METHODS: The panel data method is used to investigate the effect of human capital, institutional quality, and innovation on regional gross domestic product per capita from 2011 to 2021. The Levin-Lin-Chu test was employed to determine the reliability of the variables. The panel cointegration are used to ensure the existence of long-term relationship between the dependent variable and the independent variables. In order to select the pooling and panel method, Flemer’s test was used, and Hausman’s test was used to select fixed and random effects methods. Also, statistical and econometric analysis is done with Stata17.0 software. FINDINGS: The results of the random effects method in the first and the second models indicated that the human capital index has had a positive and significant effect on gross domestic product per capita at the level of 1% and its coefficient are 0.878 and 0.905, respectively. So, human capital improvement facilitating the absorption of technology, and boosting the productivity of production factors and increases economic growth. Also, the institutional quality has had a positive and significant effect on gross domestic product per capita at the 1% level in the first model and its coefficient is 0.182. Moreover, the coefficient of interaction effects of institutional quality and government consumption expenditure in second model is 0.073 and is statistically significant at the 1% level. According to this, Institutional quality shape the economic environment of countries and improves the economic performance. The Innovation index has had a positive and significant effect on gross domestic product per capita at the level of 1% and its coefficient in the first and the second models are 0.324 and 0.331, respectively. Therefore, strengthening the innovation system expanding the supply of new products and services. CONCLUSION: The results indicate that, growth rate of gross domestic product per capita averaged at 2.12% over the sample period with standard deviation of 3.66 among the selected oil-exporting countries. Based on the results, improving the human capital through education and the acquisition of diverse skills have led to an increase in gross domestic product per capita at the level of 1%. In addition, the institutional quality limit government spending and direct financial resources towards healthy investments. According to this, institutional quality has increased regional gross domestic product through government consumption expenditures at the level of 1%. In addition, improving the system of innovation by maximizing the use of existing resources and boosting productivity has increased production.