Italy, A Showcase For Why Human Capital Matters

One of the key criticisms of my last post on the tight connections between (educational) human capital and economic performance is that correlation need not imply causation. An alternate (and PC-compliant) explanation is that “you get the education system you could afford, and the level of human capital in the kids is mostly determined by the efficiency of the schooling system.” Is there any evidence to support this argument?

italy-wealth-education

As a country with a long history of normal capitalist development, and with no regions enjoying particularly lucrative resource windfalls, it is not a surprise to see a close exponential correlation between my Human Capital Index (see methodology here) and Italy’s GDP (PPP, in US dollars) per capita (R2=0.7302).

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