Financial Development, Human Resources, and Economic Growth in Transition Countries

This study explored the linkage between financial development, human resources, and economic growth in a group of twenty-five transition countries during the period 1995–2019. The author applied a range of estimations such as Ordinary Least Squares (OLS), fixed effects model, and two-step GMM methods in order to estimate the empirical research model. Different from previous research, financial development in this paper was a proxy variable that was assessed based on the level of outcomes of financial institutions and the financial market in three aspects: depth, access, and efficiency. In addition, the labor force participation rate and the human development index were employed as the comprehensive proxies for human resources. Generally, financial development and human resources exert positive impacts on economic growth. Financial access and financial efficiency boost economic growth, while financial depth does not. Human development was also documented as the driver of economic growth. In addition, the interaction between aggregate financial development and the human development index demonstrated a robust spur to economic growth. These findings contribute to the literature on economic growth and have considerable implications for policymakers in transition economies.