THE IMPACT OF HUMAN CAPITAL ON ECONOMIC GROWTH

ABSTRACT

A nation cannot experience economic growth without human capital development. For human capital to actually have any impact on economic growth some investment has to be made. Investment in human capital consist of ;education, training, health and other social services, that will help in enhancing productive capacity of labour. This project examines the impact of human capital on economic growth in Nigeria from 1980-2006. The study used the ordinary least square technique (O L S) to determine the relationship between human capital and economic growth. This finding demonstrate the relevance of real gross domestic product in boosting the human capital development through the ratio of student enrolment in schools.

CHAPTER ONE 
INTRODUCTION   
1.1     BACKGROUND TO THE STUDY 
The concept of human capital is a relatively recent idea in the realm of economic theory. While economists have long paid close attention to the concept of investments in physical capital in recent years they have placed emphasis on the concept of human capital investments. Largely, this shift occurred as a result of the failure of classical economist’s theory to explain the dominance of developed countries over undeveloped ones in the international market. Human capital covers a broad range of concepts but the most essential feature is increased productivity through investing in employees, it can mean education acquired from elementary school level, training of basic reading and writing skills, to job training, both of general  and specific skills. 
The use of the term human capital in the modern neoclassical economic literature dates back to Jacob Mincer pioneering article “Investment in Human Capital and Personal income distribution” in the Journal of Political Economy in 1958. And the best known application of the idea of ‘Human Capital’ in economics revolves around the work of Mincer, Schultz and Gary Becker of the Chicago school. Becker’s book entitled Human Capital published in 1964 became a standard reference for many years. 
According to Gary Becker; Human Capital is similar to “physical means of production”( example factories and machineries) one can  invest in human capital (via education, training and medical treatment) and one’s income depends partly on the rate of return on the human capital one owns, which allows one to receive a flow of income which is like interest earned. Human capital is substitutable though it will not replace land, labor or capital  it can be substituted for them to various degrees and be included as a separate variable in a production function.   
Human capital can also be defined as a way of defining and categorizing people’s skills and abilities as used in employment and otherwise contribute to the economy. It is also used to refer to the skills and knowledge intensity of the labor force in an economy which are essentially acquired through schooling and training. The organization and economic co-operation and development define human capital as “The knowledge, skills competences and attributes embodied in individuals that are relevant to economic activity” (Schuller 2001) while duration of schooling and levels of qualification are the standard measures.  Laroche et al (1999) further extend this notion to include “innate abilities”. Innate abilities are;