Economics and Human Capital

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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, 2010), and human capital development challenges in Nigeria (Ugal and Betiang, 2003). These studies provide both theoretical and empirical foundation for the contributions of human capital to economic growth. However, in spite of the increased academic interest in the subject under discussion, several issues relating to the human capital development and economic growth relationship remain hitherto unsettled. Chief among these issues relate to the fact that the empirical linkage between human capital development and economic growth in Nigeria is yet unclear. This is because a good number of studies that have examined the influence of human capital development on the Nigeria’s economic growth have generated varying outcomes (Lawanson, 2009; Ogujiuba and Adeniyi, 2004). Furthermore, while a long run relationship has been established between human capital development and economic growth in Nigeria, the impact of an aggregation of capital and recurrent expenditures on health and education respectively has not been sufficiently addressed by researchers. This study is therefore carried out to fill some of these gaps. It is designed to estimate the impact of human capital development on economic growth, ceteris paribus. The rest of this paper is organized as follows: Section 2 gives

72

ISSN 1913-9063

E-ISSN 1913-9071

www.ccsenet.org/jsd

Journal of Sustainable Development

Vol. 4, No. 3; June 2011

a brief review of literature, section 3 discusses the methodology of the study; in section 4 we specify and estimate the model of this study and in section 5, and we conclude the paper. 2. Literature Review

One major challenge facing the global community is how to achieve sustainable development. According to the IMF (2002), sustainable development is made up of three pillars. They are economic development, social development and environmental protection. The essence of these pillars are to maintain and enhance the capacity and capability of future generations while meeting the...
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