Abstract:

“The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labor” is the opening sentence of Adam Smith’s Wealth of Nations. According to Smith market dimension determines the level of specialization. Specialization implies more knowledge. The final result is higher growth. After Smith economists did not pay any more attention to human capital. Their attention was kept by population (Malthus) or by physical capital stock (neoclassic school). At the beginning of the sixties of the XX century Gary Backer published his fundamental contribution to the theory of human capital. This paper examines the basic features of Backer’s model. The focus is on how a country can generate a competitive advantage in the production of human capital. Human capital has grown rapidly in both US and EU where represents a wide fraction of total capital. Investment in education is thus more and more the core engine of long run growth. Subsequently on the base of Backer’s theory the paper examines the case of EU and “Europe 2020” strategy. Final considerations will deal with Turkey’s economic development and the need for a quality education policy, based on investments and on market incentives, bound to guarantee growth sustainability. Keywords: Human Capital, Economic Growth, EU

Keywords: