Human Capital Formation in Bangladesh

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Human Capital Formation and Economic Development in Bangladesh: A Time Series Analysis

Corresponding Author
Usman Qammar
M.Phil Scholar, National College of Business Administration and Economics (NCBA&E), 40-E/I, Gulberg-III, Lahore-54600, Pakistan. Email: economistusman@yahoo.com
Cell # 0092-03216525081

Human Capital Formation and Economic Development in Bangladesh: A Time Series Analysis Abstract:
It is generally accepted in Economics that there is a great role of human capital formation in determining the national income. This is the basic need and the general priority need of any country to make policies for the human welfare and Economic Development of the country. The study uses the GDP as a dependent variable and Gross capital Formation, Secondary school Education and Labour Force Total as Independent variables. We use the 29 years data since 1980 to 2009. The data is collected from WDI. ARDL approach is used to check the long run co-integration between the variables. The Granger Causality test is use to check the causal relationship between the variables. The results of ARDL co-integration shows that there is no co-integration exist among the variables. Secondary School education does granger cause to the Gross capital formation. But the Gross capital formation does not granger cause to the Secondary school education. In this way, the results also shows that GDP does granger cause to the Secondary School education but Secondary school education does not Granger cause to the GDP. The results also shows that Secondary school education also does Granger Cause to the Labour Force Total but the labour force total does not Granger cause to the Secondary School Education. Keywords: Human capital formations, physical capital, Secondary school education, labour force total.

1. Introduction:
It is generally accepted in Economics that there is a great role of human capital formation in determining the national income. This is the basic need and the general priority need of any country to make policies for the human welfare and Economic Development of the country. For the formation of Human Capital, there is a great role of education and health. There are many factors such like land, physical capital, human capital and labour which are considered as important for the economic growth and development and growth. All the factors have their own importance and their role in economic growth and development. But the human capital is considered to be the most important than all the other variables. The development of any economy is based on Economic factor of production along with management and amassing of its human resource. All the nations are different in population, resources, have different their history and the different terms of trade as well as different pattern of trades. Nations are also different in regional and religious factors. This is not compulsory that formation of human capital essential for each country but its degree varying geographically culture to culture and from country to country. The countries which are developed spend comparatively more expenses in education than the developing and poor nations. The reason behind this is, the developed nations have more per capita GDP to invest in accumulation of human capital in order to get more gains from the rest of the world. ( Elu, 2000: Oketch 2002 and Chani 2011).

How much the physical capital should invest based on the future needs of the projects. Now the question is why we do invest the human capital formation? There are two basic purposes behind this, firstly it increases the efficiencies of the labour force in the nation and secondly, it also reduces the unemployment level of the nation. So, it is clear that financing on human capital formation is very necessary for the individuals as well as a nation for gaining the economic development. Ferroni and Kanbur (1990) make a simultaneous equation model to check the relationship between...
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