HUMAN CAPITAL DEVELOPMENT, TOTAL FACTOR PRODUCTIVITY AND ECONOMIC GROWTH IN SELECTED SUB-SAHARAN AFRICAN COUNTRIES (1981-2020)

The research investigated the development of human capital, total factor productivity, and economic growth in selected Sub-Saharan African (SSA) nations spanning a 40-year period from 1981 to 2020. The research employed a quantitative descriptive research approach and included fifteen SSA countries chosen based on sub-regional groups due to data availability. These countries were categorized as follows: West Africa (Nigeria, Ghana, Cote d'Ivoire, and Senegal); Central Africa (Cameroon, Equatorial Guinea, Rwanda, and the Republic of Congo); East Africa (Kenya, Uganda, and Tanzania); and Southern Africa (South Africa, Angola, Zambia, and Zimbabwe). Data collected were subjected to descriptive and correlation analyses to determine key statistics such as mean, median, maximum, minimum, and standard deviation. Correlation analysis was utilized to assess the strength of the relationship between various quantitative variables. Additionally, Panel Unit Root and Cointegration tests were conducted on individual variables due to the potential non-stationarity of some panel variables. The trends and patterns observed in the data over the years indicated that human capital development in SSA countries, as measured by the Human Development Index (HDI), displayed similar levels of development across regional groupings and developmental stages. The study's results unveiled various facets of the link between human capital development, infrastructure, and technology on economic growth in the selected SSA countries. Notably, the growth of the labor force showed an unexpected negative correlation with economic growth, contrary to prior expectations. The direct effect analysis also revealed a negative impact of technology on economic growth, which contrasted with the positive and significant impact of the interaction between human capital and technology on economic growth. The study demonstrated that the combined effects of human capital development, technology, and infrastructure on economic growth in SSA countries substantiate the study's objectives. It emphasized that human capital alone is insufficient to foster growth but can create a conducive environment and provide the necessary physical infrastructure and technology to bolster economic growth. In conclusion, the research established that human capital exerts a substantial influence on economic growth in Sub-Saharan countries, particularly through its interaction with technology and physical infrastructure. Among the recommendations, the study suggested that governments should address excess labor force challenges in SSA countries by investing in education, healthcare, and vocational training.

2.1.2.1 Intellectual Capital

2..1.2.2 Social Capital

 2.1.2.3 Organisational Capital

2.1.2.4 Knowledge

2.1.2.5 Education

2.1.3.1 Investment in Education and Health as a Major Factor in Human Capital Development and Its Connection with Economic Growth. 

2.1.5    Economic Growth

2.1.5.1 Human Capital Development Index

2.2.1.1 The Augmented Solow Model

2.2.2   The Endogenous Growth Model

2.2.3.1 Gary Becker’s Theory of Human Capital

2.2.3.2 Schultz/Nelson-Phelp’s Theory of Human Capital

2.2.3.3 The Modernisation Theory 

2.2.3.4 The Dependence Theory 

3.2    Model Specification

3.2.1      Determinants of Total Factor Productivity Growth (∆A/A )

REFERENCES

Economic growth has been a focal point of both theoretical and empirical research for many years. Nevertheless, the mechanisms underlying economic performance and growth remain inadequately understood (Easterly, 2001; Young & Norman, 2019). This lack of comprehension can be partly attributed to the absence of a unifying economic theory and the overly simplistic approach that mainstream economics takes toward the issue (Petrakos et al., 2007; Young & Norman, 2019). Despite the absence of a unified theory, several partial theories discuss the influence of various factors on economic performance and growth.

In essence, every nation aspires to achieve five key macroeconomic policy objectives, which encompass full employment, price stability, equitable income and wealth distribution, balance of payments equilibrium, and economic growth. Economic growth is a foundational element for sustainable development. Consequently, to attain economic growth, it is imperative to enhance the quality of life for the growing population within a country (Nwanne, 2015).

Furthermore, certain factors are deemed pivotal in the growth process, including the development of human capital and total factor productivity (encompassing technology and infrastructure). Generally, human beings are regarded as the primary source of productivity and economic growth (Ahmad & Schroeder, 2003; Mankiw et al., 1992; Pelinescu, 2015). This is because equipment and technology are products of human ingenuity that can be harnessed to boost productivity. Thus, the success of any productive endeavor hinges on human creativity and innovative ideas (Adelakun, 2011; Asikhia & Awolusi, 2015; Mustapha et al., 2014; Pelinescu, 2015).

According to Oladeji and Adebayo (1996), as cited in Anyanwu et al. (2015), human resources are integral to the growth process and are both the means and ends necessary to achieve economic progress. Consequently, investment in human capital is pivotal in ensuring that a nation's human resources are knowledgeable, skilled, productive, and healthy, facilitating the optimal utilization of other resources to drive growth and development (Adeyemi & Ogunsola, 2016).

Moreover, Ragan and Lipsey (2005), as cited in Ogunleye et al. (2017), have revealed that many countries in Sub-Saharan Africa (SSA) have not yet reached their maximum potential in terms of investment in human capital development (education and healthcare) to enhance their economic growth. This deficiency in government spending on human capital development in SSA countries has given rise to a range of challenges, including subpar educational outcomes resulting in ill-prepared graduates and inadequate healthcare infrastructure. In general, developing nations are characterized by low literacy rates, low income, deficient healthcare systems, gender inequality, and substandard living conditions. Furthermore, inadequate and often insufficient government expenditures on healthcare and education underscore the need for improved infrastructure and technological advancement to enhance human capital development.

Additionally, Todaro and Smith (2011), as cited in Ogunleye et al. (2017), elucidated that this low level of human capital development hampers individual productivity and leads to a wide array of socioeconomic issues. These include poverty and unemployment, which have reached alarming levels in numerous developing countries, particularly in SSA. Conversely, countries with well-developed human capital reap various benefits, including reduced poverty, increased job opportunities, equitable income distribution, gender parity, and sustainable economic growth rates. Conversely, countries with deficient human capital development indicators often experience lower life expectancy and higher mortality rates.

As in many developing countries, the primary focus of policies in African countries is to have high and sustainable economic growth. Such high and sustainable economic growth is necessary, if not sufficient, for broader development, enlarging the scope for individuals to be productive and creative. It makes it possible to achieve other important objectives of individuals and societies, including sparing people en masse from poverty and struggle. In addition, it creates the resources to support education, health care, and the other Sustainable Development Goals (SDGs) to which the world has committed itself (Anyanwu, 2016).

However, to achieve and maintain such a high growth rate, policymakers need to understand the determinants of economic growth (Anyanwu, 2016). These determinants include human capital development, infrastructure and technology as significant factors that promote productivity in an economy. Human capital is perhaps the most critical and active determinant of economic growth (Uzodigwe et al., 2019).  

Infrastructure alone is not sufficient to bring about long term development. The explanation is that without human capital, human progress would be minimal, like plants, offices, computers, automated equipment, internet systems and all other facilities that any nation may install remain unproductive except for human efforts and direction. Likewise, human capital may not perform largely without the infrastructure and technology needed to increase and enhance productivity (Ohanyere et al., 2019). Thus, generating sustained economic growth in Africa remains one of the pressing challenges to global development; not much is known about Africa-specific determinants of economic growth.  

The quality and quantity of available human capital development can directly affect the growth of an economy by expanding the knowledge and skills of its people. Therefore, policymakers should be able to determine from findings whether human capital development affects economic growth in SSA to use it as an instrument to promote growth. Hence, the need to analyse the trends and patterns of human capital development in selected SSA countries.

Moreover, several studies have been conducted theoretically and empirically to examine how human capital development has impacted economic growth. Many of the studies were of the view that human capital development has impacted positively on economic growth. For instance, studies like Adeyemi and Ogunsola (2016), Akaakohol and Ijirshar (2018), Attahir et al. (2020), Ekperiware et al. (2017), Shuaib and Oladayo (2016), Sulaiman et al. (2015), Uzodigwe et al. (2019), as well as Widarni and Wilantari (2021) found that human development index indicators (education, life expectancy and gross national income per capita) as a proxy to measure human capital development, positively influenced growth.

Several studies have been conducted at the empirical level, but the number of studies on SSA countries is few. The studies also have a pitfall or gap. For instance, studies like Bokana and Akinola (2017), Danquah and Ouattara (2014), as well as Zelleke et al. (2013) investigated the contributions of human capital development and total factor productivity to economic growth in selected SSA countries. One of the major pitfalls common to these studies is that they focused more on the direct effect of human capital development on productivity growth and the adoption of technology without considering the direct effects of human capital development and selected total factor productivity components (technology and infrastructure) which serve as the passive agents needed to achieve economic growth. 

In addition, Adejumo and Adejumo (2017) examined the causal relationship between human capital development and total factor productivity. The study found that the Granger causality estimate revealed a unidirectional causality between human capital development and productivity growth. The uni-directional causality implied that productivity growth had facilitated the advancement of human stock of knowledge, but human capital has not caused productivity growth. Therefore, there is a need to incorporate technology and requisite infrastructure to facilitate human development. Given this, the study seeks to interact the effect of human capital development and each of the two components of total factor productivity on economic growth, which previous studies have failed to address. 

Lastly, this study aims to discover the complementarity between the variables using the right quality and quantity of human capital development and the necessary underlining factors to achieve the needed growth, if they are positive and statistically significant or not. Thereby looking at the substitutability of the variables, which can be further put into a study by researchers. 

 

The broad objective of this study is to examine the direct and joint effects of human capital development and total factor productivity on economic growth in selected SSA countries over the period 1981-2020. The specific objectives are to:

This study seeks to provide answers to the following questions:

The focus on the economics of human capital development and the components of total factor productivity in this study is of both theoretical and empirical significance. Several theoretical and empirical studies have been conducted, contributing to understanding the nexus between human capital development and economic growth. However, not so much appreciated in these studies is the moderating influence of the total factor productivity. By this study, a contribution to knowledge is expected to be made in this area of research, bringing to the fore how such factors as technology and infrastructure could moderate the nexus between human capital development and economic growth.

To scholars and researchers in this field of study, outcomes from this study will help deepen understanding of the role of human capital development in economic growth. To a large extent, this study is expected to give credence to the underlying proposition of the essence of the augmented Solow’s model that emphasises technology and human capital as critical factors for long-run economic growth.

The policy relevance of this study cannot be overemphasised. Empirical facts emanating from this study will provide the basis for policy formulation and planning for human capital development in the pursuit of sustainable economic growth in developing nations. A crucial argument in this study is that human capital development on its own is not sufficient enough to bring about the needed economic growth. Other complementary factors such as technology and infrastructure need to be factored in along with human capital. Therefore, relevant empirical evidence from this study will provide necessary inputs for requisite policy formulation.

The study examined the direct and joint effects of human capital development and total factor productivity on economic growth in selected SSA countries. The research used panel data for the span of 40 years from 1981 to 2020. This gave the study a good sample for conducting research, making new findings and relevant recommendations. It is a long period for robust empirical analysis and data availability from each selected country using relevant econometric techniques. The period captured both the military and democratic regimes for Nigeria, likewise in other Sub-Saharan countries like the Republic of Congo, Ghana, and Angola. Sub-Saharan Africa is a geographical area of the continent of Africa that lies in the south of the Sahara. According to the United Nations, it consists of all African countries and territories fully or partially south of the Sahara. The SSA consists of 46 countries, which can be categorised into West, East, Central and Southern Africa.

Nonetheless, the selected SSA countries for the period under study were categorised into four regions, i.e. West Africa (Nigeria, Ghana, Cote d’ Ivoire and Senegal; Central Africa (Cameroon, Equatorial Guinea, Rwanda and Republic of Congo; East Africa (Kenya, Uganda and Tanzania; and Southern Africa (South Africa, Angola, Zambia and Zimbabwe) which made a total of 15 countries. These countries were selected based on their Human Development Index (HDI), which the summary was used to measure average achievement in key dimensions of human development: a long and healthy life, knowledge, and a decent standard of living. It was also used to distinguish whether the country was developed, developing, or underdeveloped measuring the impact of economic policies on quality of life.

Countries fell into four categories based on their HDI: very high, high, medium, and low human development. South Africa represented the high human development economies; Equatorial Guinea, Angola, Kenya, Zimbabwe, Republic of Congo, Cameroon, Ghana and Zambia represented the medium human development economies; while Nigeria, Tanzania, Senegal, Rwanda, Uganda and Cote d’ Ivoire represented the low human development economies. This study also evaluated whether the difference in HDI rates had direct and joint effects on public spending in this economy and how it had impacted economic growth. The major variables considered in this study were the HDI as a proxy for human capital development, physical infrastructure index as a proxy for infrastructure and research as well as development as a proxy for technology (Khalafalla & Abdalla, 2013; Ohanyere et al., 2019; Sulaiman et al., 2015), which constituted the main variables used in measuring human capital development and selected total factor productivity (technology and infrastructure).