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Human capital and growth in the Gulf: Evidence from panel econometrics, asymmetric dynamics, and structural breaks

V. Natarajan

Cogent Economics and Finance2026https://doi.org/10.1080/23322039.2026.2624873article
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Abstract

This study examines the role of human capital in shaping growth in Bahrain, Oman, and Saudi Arabia from 2004 to 2022, highlighting its asymmetric and shock-sensitive nature in resource-dependent economies. A layered econometric strategy is applied, combining panel fixed effects with Driscoll–Kraay corrections, Fisher-type cointegration, nonlinear ARDL (NARDL) models, Toda–Yamamoto causality, and Bai–Perron structural break tests. By differentiating between total health expenditure (WDI) and government health expenditure (WHO), the analysis shows that only state-driven spending exhibits asymmetric and causal effects on growth—a distinction largely overlooked in earlier GCC studies. Results reveal that fiscal expansions in health are strongly growth-enhancing, while contractions impose disproportionately larger costs, underscoring the opportunity cost of austerity. Causality analysis identifies heterogeneous patterns: Oman follows a growth–education cycle, Bahrain’s health spending is growth-induced, and Saudi Arabia’s government health expenditure directly drives growth. Structural break tests confirm that global crises in 2008, 2015, and 2020 reshaped these dynamics. The findings advance debates on endogenous growth, fiscal multipliers, and the resource curse, while offering policy-relevant insights. They demonstrate that protecting education, health, and labour market utilisation aligns directly with SDG 3 (health), SDG 4 (education), and SDG 8 (inclusive growth), supporting diversification and resilience in the Gulf.

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https://doi.org/https://doi.org/10.1080/23322039.2026.2624873

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@article{v.2026,
  title        = {{Human capital and growth in the Gulf: Evidence from panel econometrics, asymmetric dynamics, and structural breaks}},
  author       = {V. Natarajan},
  journal      = {Cogent Economics and Finance},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1080/23322039.2026.2624873},
}

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