IMPACT OF HUMAN CAPITAL ON ECONOMIC GROWTH.
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
IMPACT OF HUMAN CAPITAL ON ECONOMIC GROWTH.
Chapter one
1.1 Background of the Study
Human capital is a relatively new term in economic theory. While economists have long been interested in the concept of physical capital investments, in recent years they have shifted their focus to the concept of human capital investments.
This transition was largely caused by the inadequacy of traditional economic theory to explain rich countries’ dominance over developing countries in the international market.
Human capital encompasses a wide range of concepts, the most important of which is higher productivity through employee investment. This might include education beginning in elementary school, training in fundamental reading and writing abilities, and job training in both general and specialist skills.
The term “human capital” has been used in modern neoclassical economic literature since Jacob Mincer’s seminal 1958 essay “Investment in Human Capital and Personal Income Distribution” in the Journal of Political Economy.
And the best-known application of the concept of ‘Human Capital’ in economics focuses around the work of Mincer, Schultz, and Gary Becker of the Chicago school. Becker’s book, Human Capital, released in 1964, became a standard reference for many years.
According to Gary Becker, human capital is similar to “physical means of production” (for example, factories and machinery). One can invest in human capital (via education, training, and medical treatment).
Nakamura (1981) defines human capital broadly as labour skills, managerial skills, entrepreneurial and innovative abilities, as well as physical attributes such as health and strength.
According to Newland and San Segundo (1996), human capital refers to an individual’s skill and education, as well as the costs of physically raising a child and maintaining good health.
Human capital is defined as an intentional and continual process of obtaining the necessary knowledge, education, skills, and experiences for a country’s rapid economic progress (Harbison 1973; Salleh 1992).
It includes investments in education, training, and other social services such as transportation and housing. Underdeveloped countries have two distinct workforce issues:
they lack crucial skills required for the industrial sector and have an excess labour force. The availability of surplus labour is mostly due to a lack of critical skills, and these issues are intertwined.
The need for investment in human capital formation in such economies is more obvious from the fact that despite the massive imports of physical capital, they have not been able to accelerate their growth rate because of the existence of undeveloped human resources.
Growth, of course, is possible from the increase in conventional capital, even though the available labour force is lacking in skills and knowledge growth rate will be severely limited without the lat Human income is then determined in part by the rate of return on the human capital that one owns, allowing one to receive a flow of income similar to interest received.
Human capital is substitutable; while it cannot replace land, labour, or capital, it can be substituted for them to varying degrees and included as a separate variable in a production function.
Human capital may also be defined as a method of describing and categorising people’s talents and abilities as they apply in the workplace and contribute to the economy. It is also used to describe the skills and knowledge intensity of an economy’s labour force, which are mostly obtained through education and training.
Human capital is defined as “the knowledge, skills, competences, and attributes embodied in individuals that are relevant to economic activity” by organisations and economic cooperation and development.
(Schuller 2001), although time of schooling and degrees of certification are the conventional indicators.
Laroche et al. (1999) broaden this concept to include “innate abilities”. The innate abilities are:
1. They are not part of the actual body, hence there is no possibility of double counting.
2. They are inextricably linked to other aspects of human capital like experience.
It is necessary to staff and extend government services in order to implement new land use systems and agricultural practices, as well as to develop new modes of communication in order to advance industrialization and establish the educational system.
People are a country’s most valuable asset, and economic progress cannot occur until people develop themselves.
When we talk about human capital, we mean the capital that is embodied in humans and produces income and other useful outputs over time.
For example, schooling, a computer training course, the cost of medical care, and lectures on the virtues of punctuality and honesty are all forms of capital. This is because it increases profits, improves health, or contributes to a person’s positive habits over the course of his life.
Education, medical care, and other expenditures are referred to as investments in human capital because people cannot be separated from their knowledge, skills, health, or values in the same way that they can be separated from their financial and physical effects (Gary Becker 1964).
As a result, we can conclude that a person’s capital consists of his intrinsic abilities and other skills gained throughout time. This factor prevents any economy from experiencing considerable economic growth unless it has appropriate human and natural resources.
Human capital, like natural and physical capital, will degrade and decay unless it is increased and maintained through advances in public health and sanitation, social welfare services, proper nutrition, and guaranteed employment programmes.
Human capital formation indices should be incorporated into the planning process to ensure long-term growth and development.
The significance of human capital formation is seen in the Khartoum declaration of 1998, which stated that,
The human dimension is essential for economic recovery. No SAP or economic recovery strategy should be developed, structured, or implemented unless it includes explicit social and human priorities. Without the human imperative, no significant structural adjustment or economic recovery is possible (Adedeji et al 1990).
Need help with a related project topic or New topic? Send Us Your Topic