A Spillover Effect of Human Capital on Gross Capital Formation: A Quantile Regression Approach

The major aim of this paper is to examine the extent to which human capital spillover effects are responsive to different quantiles of gross capital formation across selected 19 OECD countries for the period 1980-2017. We develop an endogenous model for estimating the spillover effects on investment regarding the bargaining power of workers. In this sense, different quantile regression models are applied to analyze this miscellaneous linkage and to correct possible diagnostic problems stemming from the endogenous regressors. The empirical results suggest that there are statistically significant spillover effects of human capital on investment level due to a change in the degree of threat option of capital and thereby a decrease in bargaining power of labor. Moreover, the findings reveal the fact that there is significant heterogeneity of human capital spillovers across different quantiles, which means that lowest quartile of investment activities are confronted with higher value of spillovers.