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
TABLE OF CONTENTS
Background of the study
Statement of the problem
Objective of the study
Significance of the study
Sources of data
Scope of the study
Organization of study
CHAPTER TWO: LITERATURE REVIEW
2.1 Concept of human capital
2.2 Empirical investigations on the work of
human capital and economic growth
2.3 Education in Nigeria
CHAPTER 3 : RESEARCH METHODOLOGY
3.2 Nature of research Method
3.3 Research Design and model specification
3.4 Data sources and measurement
3.5 Statistical criteria
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION
4.1 Presentation and analysis of data
4.2 Discussion of results
CHAPTER FIVE: SUMMARY,
RECOMMENDATIONS AND CONCLUSIONS
E-view statistical data
1.1 BACKGROUND OF 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 is, 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 Nakamura (1981) also defines human capital broadly as labor skills,
managerial skills and entrepreneurial and innovative abilities plus such
physical attributes as health and strength.
Newland and San Segundo (1996) see
human capital as that ability and education of an individually and on the other
hand as the costs of physically raising a child and health.
Human capital refers to a conscious
and continuous process of acquiring requisite knowledge, education, skills and
experiences that are crucial for the rapid economic growth of a country (Harbison
1973, Salleh 1992). It involves investment in education, training and other
social services like transport facilities and housing. Underdeveloped countries
are faced with two diverse manpower problem; they lack the critical skills
needed for the industrial sector and have a surplus labor force. The existence
of surplus labour is to a considerable extent due to the shortage of critical
skills and these problems are interrelated.
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
although growth of course is possible from the increase in the conventional
capital even though the available labour force is lacking in skills and
knowledge growth rate will be seriously limited without the latter. Human is
then one's income depends partly on the rate of return on the human capital one
owns, which allows on the receive a flow of income which is like interest
earned. Human capital is substitutable though it will not replace land, labour
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
(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:
1. They are not part of the physical body
and there is therefore no chance of double counting.
2. They can not be separate from such things
in human capital such as experience.
needed to staff and expand government
services to introduce new system of land use and new methods of agriculture, it
develops new means of communication to carry forward industrialization and to
build the educational system.
People are the most important asset a
nation can have and there can not be any form of economic development if the
people don't develop themselves.
When we talk about human capital the
capital being referred is the one embodies in human beings that yield income
and other useful outputs over long period of time it could be schooling, a
computer training course, expenditure of medical care and lectures on virtues
of punctuality and honesty are also capital. This is because it raises
earnings, improve health, or add to a person's good habit over much of his
The expenditures on education,
medical care and so on are called investments in human capital; they are called
human capital because people cannot be separated from their knowledge, skills
health or values in the way that they can be separated from their financial and
physical effect (Gary Becker 1964).
We can therefore say that it is those
innate abilities and various skills acquired by a person that makes up his
capital. Due to this factor there can be no significant economic growth in any
economy without adequate human and natural resources. The stock of human
capital like the stock of natural and physical capital will deteriorate and
decay if not increased and maintained through improvements in public health and
sanitation, social welfare services, good nutrition and guaranteed employment
schemes. The human capital formation indices should be integrated into the
planning process in order to achieve a sustainable growth and development.
The importance of human capital
formation can be seen in the Khartoum
declaration of 1998 which asserted that,
...The human dimension is the sine
qua non of economic recovery... No SAP or economic recovery programme should be
formulated or can be formulated or can be implemented without - having at its
heart detailed social and human priorities. There can be no real structural
adjustment or economic recovery in the absence of the human imperative (Adedeji
et al 1990).
Yesufu (2000) as cited in Impact of
Human Capital on Economic Growth in Nigeria: An error correction
approach opines that "The essence of human resources development becomes
one of ensuring that the work force is continuously adapted for and upgraded to
meet the new challenges of its total environment".
This is because the economy is a
dynamic entity, which is constantly changing in response to various stimuli
such as introduction and discovery of new techniques of production.
Okojie (1995) as cited in the impact of human
capital on economic growth in Nigerian: an error correction approach concludes
that human capital formation "is thus associated with investment in man
and his development as a creative and productive person". The totality of
the effort and cost involved in this massive upgrading of the productive
capacity of the people constitute investments in human resources, which is also
referred to as manpower development or human resource development. Human
capital can be acquire and developed in different ways namely; education,
training, health promotion, as well investment in all social services that
influences mans productive capacities including, telecommunications transport
and housing. In the words of Yesufu (2000) as cited in The Impact of Human
Capital on Economic Growth in Nigeria: can error correction approach
"education and training are generally indicated as the most important
direct means of upgrading the human intellect and skills for productive
However human capital formation
transcends mere acquisition of intellectual ability through formal education
system to include the family, the educational system, formal or informal
institutions, special professional and training organizations; enterprise in
house arrangements, and even individual self efforts.
For a nation to be termed or
described as developed it must have the following characteristics and according
to (Todaro 2003) these are;
1. To raise levels of living including, in
addition to higher incomes, the provision of , more jobs, better education and greater
attention to cultural and human values all of which will serve as not only to
enhance material well being but also to generate greater individual and natural
2. To increase the availability and widen
the distribution of basic life sustaining goals such as food, shelter, health
3. To expand the range of economic and
societal choices available to individuals and nations by freeing them from
servitude and dependence not only in relation to other people and nation states
but also to the forces of ignorance and human misery.
If these three objectives are
anything to go by then we can rightly say that Nigeria is still underdeveloped and
exhibiting the characteristics of a low - income developing country this
includes low levels of living, low per-capita national income, income
inequality, poverty etc.
Nigerian can be categorized as a
country that is primarily rural, depends on primary product, exports, has high
population growth, suffers from widespread poverty and rising unemployment and
must deal with tribal and ethnic conflicts. Since the advent of Nigeria's
independence in 1960 it has experienced ethnic, regional and religious
tensions, magnified by the significant disparities in economic and educational
development between the south and the north.
Nigeria's social indicators placed it among
the poorest in South Saharan Africa with a
human development index of 0.401 was ranked 137th. Among 174 developing
countries considered in 1993 (Odusola 1998). Infant mortality rate was - about
144 per 1000 live births in 1981( Odusola 1998).
The performance of the economy has
not been satisfactory, from 1980s using conventional indices. The periods 1960-65,
1970-75, 1976-80, 1981-85 and 1986-92 are very significant and they represent
important episodes in the economy. The 196-65 period attempts to capture both
the independence and the commodity export boom at that time. The period 1970-75
reflects the era of oil windfall while 1976-80 period incorporates parts of the
oil boom and austerity measures and various stabilization packages finally, the
period represents the structural adjustment years. The oil boom and the
consequent neglect of agriculture in the 1970s and early 1980's caused a
massive movement of people from rural to urban centers. Moreover regional and
income disparities are among the worst in the world (Todaro 2003).
For Nigeria to turn the tides of its
economic misfortune and mismanagement, which includes a high rate of
unemployment, poverty illiteracy and so on, it will have to take steps to raise
domestic food production and labor productivity; use oil revenues more
rationally to diversify economic activity and reduce the burden of it's foreign
debt; lower population growth through a combination of effective family
Improve rural health and education
and a reduction in absolute poverty: seek increased foreign aid and investment,
including significant debt relief (which was achieved recently): make greater
use of market price incentives to allocate resources while endeavoring to
improve public and private decision making and maintain political stability
between rural ethnic and religious groups (Todaro 2003).
All these can rightly be achieved
through human means and therefore the role of human capital to economic growth
cannot be overemphasized and the development of human capital has bee
recognized to be an important prerequisite and an invaluable asset for a
country's socioeconomic and political transformation. Over the years, with the
large population, Nigeria
has not been able to do much in terms of economic development and poor
leadership was blamed for the nation's underdevelopment. This brings about the
question; does the large human resource available not able to affect economic
growth? The answer to this question is clear in the sense that most countries
which are less populated then Nigeria
has done relatively well in economic good. Taking the case of Japan for example, it was a highly
populated country that was able to harness its large human resource and
transform the country into a developed one. In the view of the fact that
populated countries can still achieve economic growth, this study is embarked upon
to assess The Impact of Human Capital on Economic Growth in Nigeria.
1.2 STATEMENT OF PROBLEMS
"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 centered 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".
The view was expressed by Ogujiuba
and Adeniji (2003) in their paper economic growth and human capital
development: the case of the Nigerian. They are of the view that people are a
country's most valuable assets. Going by this view, investment in human capital
in terms of education, on-the-job training and health will surely raise
productivity in Nigeria.
Much is still to be desired in educational and health sector of the economy as
we have seen that investment in human capital was the triggering factor that
led to the economic growth in other developed countries. In the light of this,
the following questions and more will need to be answered in order for human
capital to take its place in the growth process and planning horizon of
Nigerian these questions include:
1. How strong and significant will an
increase in investment in education have on the economy.
2. Does education and health have any link
in the increase in productivity?
1.3 OBJECTIVES OF THE STUDY
This study is aimed at examining
empirically the effect of human capital on economic growth and the objectives
of the study include:
1. To ascertain the Impact of Education on
Economic Growth in Nigeria.
2. Does openness to trade and human capital
promote faster economic growth?
3. To make policy recommendations based on
the findings of the research.
1.4 SIGNIFICANCE OF STUDY
The significance of this study on the
Impact of Human Capital on Economic cannot be over emphasized as the result
will help in policy making. The study is to help come to a solution on how to
accelerate economic growth.
1.5 RESEARCH QUESTIONS
The questions this research tends to
answer includes amongst others the following:
education have any impact on economic growth?
2. Does the labour force available in a
country have any Impact on Economic Growth?
domestic capital have any effect on economic growth?
1.6 RESEARCH HYPOTHESIS
The following hypothesis shall be
tested in the study:
HO: Does education have any Impact on Economic Growth.
Hl: Education has no Impact on Economic Growth.
1.7 RESEARCH METHODOLOGY
The technique of estimation to be
used to determine the Impact of Human Capital on Economic will be the ordinary
least square technique. The model to be used will be expressed in cobb-douglas
production function and the variables in the model will be logged.
1.8 SOURCE OF DATA
For the purpose of this project, data
will be sourced from the central bank statistical bulletin for the various
years and the data are all secondary data.
1.9 SCOPE OF THE STUDY
There are various investments that
can be made in order to contribute to the formulation of human capital. But
investment in education has been chosen.
The scope of the study will cover the year 1977-24 and it will be
restricted to the Nigerian
ORGANIZATION OF STUDY
This study is divided into five
chapters,hapter one contains the introduction chapter, chapter two examine the
review of literatures on human capital and economic growth. Chapter three
contains the theoretical framework and methodology. Chapter four analyses the data while the
chapter five contains the conclusion and recommendations.
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