ANALYSIS OF HUMAN CAPITAL IN SOUTH CAUCASUS AND BALTIC SEA COUNTRIES
According to economic literature “Human capital” is the stock of skills that the labor forcepossesses. In 1950s Robert Solow,anAmerican economist, developing the theory of economic grow, came to the idea of “residual”, while he was calculating the economic growth. Solow, working with data from 1909 to 1949, demonstrated that the residual was 87.5 percent of total growth in per capita terms. That residual is that portion of economic growth that the researcher cannot explain by the increase in physical productive factorssuchasthecapitalstock,the number of workers and their hours and weeks of work. It is related to per capita economic growth and demonstrated that physical capital accumulation did not explain much ofgrowth.
The explanation was knowledge creation and the growth of the labor input through educationand training. In other words, the residual was due to the increase in human capital.