Early human capital: the driving force to economic growth in island economies Verena Tandrayen Ragoobur and Jason Narsoo Department of Economics and Statistics, University of Mauritius, Reduit, Mauritius Abstract Purpose – The paper investigates into the human capital–economic growth nexus by arguing that investment in early education and health helps in achieving higher economic growth. Early investment in human capital matters most for economic growth than the increase in human capital over the years. Design/methodology/approach – A dynamic vector error correction model (VECM) together with the impulse response function and variance decomposition are used on data for Mauritius from 1983 to 2019. The paper distinguishes between the short-run and the long-run effects of human capital measured by the pupil– teacher ratio in pre-primary education and life expectancy at birth. Findings – This study’s findings reveal that investment in early education and health has contributed positively to growth performance. There is evidence for long-run growth effects arising from a positive shock in the education and health indicators. Originality/value – This paper contributes to both the theoretical and empirical literature on the human capital–growth nexus. Mauritius as a natural resource poor small economy is an important case study as it has started early in investing in its people to promote economic growth. Peer review – The peer review history for this article is available at: https://publons.com/publon/10.1108/ IJSE-11-2021-0674. Keywords Human capital, Investment in early education and health, Economic growth, VECM, Impulse response function, Variance decomposition Paper type Research paper 1. Introduction A major challenge confronting developing economies is the achievement of faster and higher economic growth. Human capital theory postulates that a country derives economic benefits from investing in its people. Human capital has a level effect in terms of higher labour productivity and increased output (Pelinescu, 2015) and a growth effect by its contribution to increased competitive advantage through innovation and technology diffusion. Nonetheless, the benefits of human capital take time to materialise and the advantages are not always visible, leading to underinvestment in human capital across many countries (World Bank, 2020). Though, the theoretical literature postulates a clear positive association between human capital and development, the empirical evidence remains rather mixed depending on the proxies used to measure human capital, the sample of countries and the estimation techniques adopted (Ali et al., 2018; Rossi, 2020). Human capital has often been proxied in the literature by enrolment rates or literacy rates but these measures have important shortcomings (Benhabib and Spiegel, 1994). Benhabib and Spiegel (1994) reveal that changes in human capital over time have little and even negative effects on economic growth. Krueger and Lindahl (2001) despite using more sophisticated approach to measure human capital in terms of the change in average years of schooling, fail to generate positive results. Various recent studies have however postulated a positive link between human capital and growth (Ogbeifun and Shobande, 2021; Korikiye and Niyekpemi, 2021; € Ozdo gan € Ozbal, 2021). Early human capital investment and economic growth The authors acknowledge the collaboration with the Chinese Academy of Social Sciences (CASS), China for this study. The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/0306-8293.htm Received 27 November 2021 Revised 25 May 2022 Accepted 7 June 2022 International Journal of Social Economics © Emerald Publishing Limited 0306-8293 DOI 10.1108/IJSE-11-2021-0674