Role of Human Capital in Economic Development: an Empirical Study of Nigerian Case

Topics: Economic growth, Economics, Capital accumulation Pages: 23 (6625 words) Published: September 11, 2011


Risikat Oladoyin S. Dauda, Ph.D

Department of Economics

University of Lagos
Akoka, Lagos


Although several theories of endogenous growth point towards a positive effect of human capital on growth, empirical evidence on this issue has been mixed. Despite various efforts of the successive Nigerian governments, virtually all indices of human development especially those of health and education are embarrassingly low. These indices include infant and maternal mortality rates, life expectancy at birth, population per physician, adult literacy rate, gross primary and secondary enrolment ratio. In the same vein, the level of resource commitments to health and education compare very unfavourably with the situation in other developing countries. Using the human capital model of endogenous growth developed by Mankiw, Romer and Weil (1992), this paper examines empirically the role of human capital in Nigeria’s economic development. The paper employed a variety of analytical tools, including unit root tests, cointegration tests and error correction mechanism (ECM). Empirical results indicate that there is, indeed a long-run relationship among labour force, physical capital investment proxied by real gross domestic capital formation, human capital formation, proxied by enrollment in educational institutions and economic growth in Nigeria. Findings show that there is a feedback mechanism between human capital formation and economic growth in Nigeria. Thus, the policy implication of the findings is that government should place a high priority on human capital development. Efforts should be intensified to increase investment in human capital to achieve the growth which would engender economic development. Most importantly, education should be given prominence in Nigeria’s developmental efforts. This would propel the economy to higher levels of productivity.

The role of human capital in economic growth cannot be overemphasized. The development of human capital has been recognized by economists to be a key prerequisite for a country’s socio-economic and political transformation. Among the generally agreed causal factors responsible for the impressive performance of the economy of most of the developed and the newly industrializing countries is an impressive commitment to human capital formation (Adedeji and Bamidele, 2003; World Bank, 1995, Barro, 1991). This has been largely achieved through increased knowledge, skills and capabilities acquired through education and training by all the people of these countries. It has been stressed that the differences in the level of socio-economic development across nations is attributed not so much to natural resources and endowments and the stock of physical capital but to the quality and quantity of human resources. According to Oladeji and Adebayo (1996), human resources are a critical variable in the growth process and worthy of development. They are not only means but, more importantly, the ends that must be served to achieve economic progress. This is underscored by Harbinson (1973) who opined that “human resources constitute the ultimate basis for the wealth of nations. Capital and natural resources are passive factors of production; human beings are the active agents who accumulate capital, exploit natural resources, build social, economic, and political organizations, and carry forward national development. Clearly a country which is unable to develop the skills and knowledge of its people and to utilize them effectively in the national economy will be unable to develop anything else”. Nigeria’s overarching objective since independence in 1960 has been to achieve stability, material prosperity, peace and social progress. However, this has been hampered as a result of internal problems....
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