Investment in Human Capital

Persistent differences in the standards of living across Arab MENA and between Arab and non-Arab MENA have historically been attributable to resource differences. If the large disparity in income per capita across MENA is, however, partly due to barriers to the adoption of technology and allocative inefficiencies, then we need to consider an alternative explanation. In order to explain these differences, this chapter concentrates on the contribution of the accumulation of skills and education to economic growth. This framework is based on the endogenous growth models developed by Lucas (1988) and Romer (1986 and 1990).