Economics and Human Capital
Abstract
This study examines the relationship between human capital development efforts of the Government and economic growth in Nigeria. It seeks to find out the impact of government recurrent and capital expenditures on education and health in Nigeria and their effect on economic growth. The data used for the study are from secondary sources while the augmented Solow model was also adopted. The dependent variable in the model is the level of real output while the explanatory variables are government capital and recurrent expenditures on education and health, gross fixed capital formation and the labour force. The result shows that there exists a positive relationship between government recurrent expenditure on human capital development and the level of real output, while capital expenditure is negatively related to the level of real output. The study recommends appropriate channeling of the nation’s capital expenditure on education and health to promote economic growth.
Keywords: Human capital development, Capital and recurrent expenditure, Economic growth
JEL Classification: H5, O43
1. Introduction
Human capital has been recognized globally as one major factor that is responsible for the wealth of nations.
According to Smith (1776) and Folloni and Vittadini (2010), human capital refers to the acquired and useful abilities of all the inhabitants or members of the society. The importance of human capital development to economic growth has been a motivating factor for scholars to examine the subject matter. For instance, several studies in Nigeria has examined, among other important issues, the nature of causality between human capital development and economic growth in Nigeria (Awe and Ajayi, 2010); the contributions of human capital to economic growth in Nigeria (Ogujiuba and Adeniyi, 2004; Omotor, 2004; Olaniyan and Okemakinde, 2008;
Lawanson, 2009; and Diawara, 2009), the role of human capital in Nigeria’s economic development (Dauda,
This study examines the relationship between human capital development efforts of the Government and economic growth in Nigeria. It seeks to find out the impact of government recurrent and capital expenditures on education and health in Nigeria and their effect on economic growth. The data used for the study are from secondary sources while the augmented Solow model was also adopted. The dependent variable in the model is the level of real output while the explanatory variables are government capital and recurrent expenditures on education and health, gross fixed capital formation and the labour force. The result shows that there exists a positive relationship between government recurrent expenditure on human capital development and the level of real output, while capital expenditure is negatively related to the level of real output. The study recommends appropriate channeling of the nation’s capital expenditure on education and health to promote economic growth.
Keywords: Human capital development, Capital and recurrent expenditure, Economic growth
JEL Classification: H5, O43
1. Introduction
Human capital has been recognized globally as one major factor that is responsible for the wealth of nations.
According to Smith (1776) and Folloni and Vittadini (2010), human capital refers to the acquired and useful abilities of all the inhabitants or members of the society. The importance of human capital development to economic growth has been a motivating factor for scholars to examine the subject matter. For instance, several studies in Nigeria has examined, among other important issues, the nature of causality between human capital development and economic growth in Nigeria (Awe and Ajayi, 2010); the contributions of human capital to economic growth in Nigeria (Ogujiuba and Adeniyi, 2004; Omotor, 2004; Olaniyan and Okemakinde, 2008;
Lawanson, 2009; and Diawara, 2009), the role of human capital in Nigeria’s economic development (Dauda,
References: Akingbade, B. (2005). Meeting the Challenges of Human Capital Development in Nigeria: The Case for Reforms in our Educational Policies and Systems. Ariyo, D. (1999). Developing a Knowledge-Driven Nigerian Economy: An Economic Framework for the 21st Century Awe, A. A., & Ajayi, S. O. (2010). The Nexus Between Human Capital Investment and Economic Growth in Nigeria Babatunde, M. A., & Adefabi, R. A. (2005). Long Run Relationship Between Education and Economic Growth in Nigeria: Evidence From the Johansen 's Cointegration Approach Becker, G. (1994). Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education. Bhutoria, N. (2000). Valuation of Human Capital. HR folks. COLI. (2001). Building Capacity to Deliver Distance Education in Nigeria 's Federal University System. Dabalen, A., Oni, B., & Adekola, O. (2000). Labor Market Prospects of University Graduates in Nigeria. World Bank. Dauda, R. O. (2010). Role of Human Capital in Economic Development: An Empirical Study of Nigerian Case. Diawara, B. (2009). Can Spending on Education by Donors and National Governments Help Enhance Education Performance in Africa? International Journal of African Studies , 31-46. Federal Ministry of Health. (2005). Health Promotion Policy for Nigeria. FMOH. Ghani, E., & Kharas, H. (2010). Service Revolution. South Asia: World Bank. Harbison, F. H. (1973). Human Resources as the Wealth of Nations. New York: Oxford University Press. Igwilo, M. (2010). Globalizing the Curriculum or Humanizing the Curriculum: Matters arising in the Search for a Viable Education in Nigeria IMF. (2002). Development, Social Development and Environmental Protection. IMF. Jhingan, M. L. (2005). The Economics of Development and Planning. Delhi: Vrinda. Lamartina, S., & Zaghini, A. (2007). Increasing Public Expenditures: Wagner 's Law in OECD Countries. Rome. Lawanson, O. I. (2009). Human Capital Investment and Economic Development in Nigeria: The Role of Health and Education Lyakurwa, W. M. (2007). Human Capital and Technology for Development: Lessons for Africa. AfDB. Maku, O. E. (2009). Does Government Spending Spur Economic Growth in Nigeria? Munich: MPRA. Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A Contribution to the Empirics of Growth. Quarterly Journal of Economics , 408-437. Meier, G. M. (2001). The Old Generation of Development Economists and the New. In T. W. Bank, Frontiers of Development Economics: The Future in Perspective (pp NBS.(2010): Statistical News: Labour Force Sample Survey, 2009; Abuja, Nigeria Ndulu, B Odia, L. O., & Omofonmwan, S. I. (2007). Educational System in Nigeria: Problems and Prospects. Journal of Social Sciences , 81-86. Ogujiuba, K. K., & Adeniyi, A. O. (2004). Economic Growth and Human Capital Development: The Case of Nigeria Ohiwerei, F. O. (2009). Job Prospect for Business Educators University Graduates in Nigeria. Current Research Journal of Social Sciences , 70-73. Olaniyan, D. A., & Okemakinde, T. (2008). Human Capital Theory: Implications for Educational Development. Omotor, D. G. (2004). An Analysis of Federal Government Expenditure in the Education Sector of Nigeria: Implications for National Development Oyejide, A. T., & Bankole, A. S. (2001). Liberalisation of the Services Sector in Nigeria: Implications of Unilateral and Multilateral Approaches Psacharopoulos, G., & Woodhall, M. (1997). Education for Development: An Analysis of Investment Choice. Radwan, I., & Pellegrini, G. (2010). Knowledge, Productivity and Innovation in Nigeria: Creating a New Economy Sakamota, A., & Powers, P. A. (1995). Education and the Dual Labour Market for Japanese Men. American Sociological Review , 222-246. Schultz, T. (1961). Investment in Human Capital. American Economic Review , Vol45, No. 57. Sen, A. (1999). Development as Freedom. Oxford: Oxford University Press. Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations Book 2 - Of the Nature, Accumulation, and Employment of Stock The World Bank. (1995). Beyond Economic Growth: Growth of the Service Sector. The World Bank. The World Bank. (2010). Knowledge, Productivity and Innovation in Nigeria: Creating a New Economy. Todaro, M. P., & Smith, S. C. (2009). Economic Development. Prentice Hall. (2011). Results; http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results; Accessed April 21, 2011. Ugal, D. B., & Betiang, P. A. (2003). Challenges for Developing Human Capital in Nigeria: Global-Local Connection. WHO. (2001). WHO Country Cooperation Strategy: Federal Republic of Nigeria. Brazzaville: WHO. World Bank. (1999). Knowledge for Development. World Bank.