The Impact of Human Capital on Economic Growth
Chapter One
Objective of the study
The objectives of the study are;
- To ascertain the role of education on economic growth
- To ascertain the role of innovation on economic growth
- To ascertain the role of technological knowledge on economic growth
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
Early studies of the effects of human capital on growth, such as Mankiw, Romer and Weil (1992) and Barro (1991), were based on data sets pertaining to a very diverse array of (more than 100) countries during the post1960 era. They used narrow flow measures of human capital such as the school enrolment rates at the primary and secondary levels, which were found to be positively associated with output growth rates. Barro and Sala-iMartin (1995), among many others, have also included life expectancy and infant mortality in the growth regressions as a proxy of tangible human capital, complementing the intangible human capital measures derived from school inputs or cognitive tests considered; their finding is that life expectancy has a strong, positive relation with growth. Acemoglu (1998) has offered a formal demonstration of how positive spill-over effects (pecuniary externalities) created by workers’ educational and training investment decisions can give rise to macro-level increasing returns in human capital. His model supposes that workers and firms make their investments in human and physical capital respectively, before being randomly matched with one another. The direct consequence of random matching is that the expected rate of return on human capital is increasing in the expected amount of (complementary) physical capital with which a worker will be provided. According to Leeuwen (2007), human capital is formal and informal education, yet it can also contain factors such as the costs of raising children, health costs and ability. He observes further that the health and education components are recognized although, education comes ahead of health, showing the priority placed on it. Similarly, Igun (2006) defines human capital as the total stock of knowledge, skills, competencies, innovative abilities possessed by the population. These obviously have education as their bedrock. Neoclassical growth implies conditional convergence; growth of income depends upon initial income plus determinants of eventual steady state income. The most critical determinant is technology improvement, which is expensive and can be influenced by policy (Parente and Prescott, 1999). By contrast there is no steady state with endogenous growth, and therefore no conditional convergence, because there is no diminishing returns in the aggregate production function. Poor countries will continue to be relatively poor, and big economies will grow faster than small. One reason for endogenous growth (see Rebelo, 1991) is that human capital is embodied in labour; one worker’s human capital cannot benefit another’s in the same way as from their own improved human capital. No doubt, there can be no significant economic growth in any country without adequate human capital development. In the past, much of the planning in Nigeria was centred on the accumulation of physical capital for rapid growth and development, without recognition of the important role played by human capital in the development process. People are assets – in fact a country’s most valuable assets. It is essential for human development that these assets be deployed sensibly. Nigeria’s overarching objective since independence in 1960 has been to achieve stability, material prosperity, peace and social progress. However, this has been hampered as a result of internal problems. These include inadequate human development, primitive agricultural practices, weak infrastructure and uninspiring growth of the manufacturing sector, a poor policy and regulatory environment and mis-management and misuse of resources. In order to ensure the economy delivers on its potentials, the country experimented with two development philosophies; a private sector-led growth in which the private sector served as the “engine house” of the economy and a public sector – driven growth in which the government assumed the “commanding heights” of the economy. The initial low level of private sector development however, led to public sector dominance of the economy, encouraged by growth in the oil sector (UNDP, 2009).
Stylized Facts of Human Capital Growth in Nigeria
The role of human resource in encouraging economic progress has been acknowledged in many studies. Human resource has been indentified not only as a major growth determinant and a channel to ease poverty but it is also very important in building or improving the quality of human beings in general (Kasim, 2010). The growth focus in Millennium Development Goals (MDGs) is more concentrated at the importance in achieving clear and real progress as an indicator or human capital indicator measured through educational foundation. Most studies have examined the effect of education through human capital investment on economic growth.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine the impact of human capital on economic growth. CBN forms the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the impact of human capital on economic growth. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of assessing effect of training and human capital development on staff performance
Summary
This study was on the impact of human capital on economic growth. Three objectives were raised which included: To ascertain the role of education on economic growth, to ascertain the role of innovation on economic growth and to ascertain the role of technological knowledge on economic growth A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from CBN. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
The impact of human capital development on economic growth in Nigeria has been established and critically analyzed. The adopted theoretical framework emanates from the endogenous growth model that opined that human capital based technological production is a significant driver of economic growth.
Recommendation
This study proffered the need for government to invest more in human capital development process and endeavours prioritize the health and education sectors budgeting considering their growth driving potentials in Nigeria.
References
- Acemoglu, D. (1998), “Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality” Quarterly Journal of Economics, Vol. 113 (November), pp. 1055-89.
- Adedeji, S.O. and Bamidele R.O. (2003), “Economic Impact of Tertiary Education on Human Capital Development in Nigeria,” In: Human Resource Development in Africa. Selected Papers for 2002 Annual Conference, Nigerian Economic Society, Ibadan, pp. 499-522.
- Adelakun, O.J. (2011), “Human Capital Development and Economic Growth in Nigeria,”European Journal of Business and Management, Vol. 3, No. 9, pp. 29-40.
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- Appleton, S. and Teal, F. (2005), “Human Capital and Economic Development,” Journal of International Development, Vol. 11, No. 4, pp. 415-444.
- Atika, T. and Alisjabbana, A. (2002), “Regional Income Inequality in Indonesia and the Initial Impact of the Economic Crisis,” Bull: Indonesia Economic Studies.
- Barro, R. (1991), “Economic Growth in a Cross-section of Countries,” The Quarterly Journal of Economics, Vol. 2, pp. 407-43.
- Barro, R.J. and Sala-i-Martin, X. (2004), Economic Growth, 2nd Ed. New York: McGraw-Hill.
