ROLE OF HUMAN CAPITAL IN ECONOMIC DEVELOPMENT: SOME MYTHS AND REALITIES*
The world today is very different from the one which experienced the two world wars. During the second half of the twentieth century, considerable advancements in science and technology, along with the establishment of broadly-based governments and strengthening of institutions, have led to significant socio-economic progress and improvement in the lives of a large number of people in many countries. However, there are still many others among us who are lagging behind. The current reality in the Asian region is the existence of significant differences in the state of economic development among countries. For instance, when GNP per capita income is taken as an indicator of economic development (see figure I.1), the figures for both Asian least developed countries and South Asian developing countries such Figure I.1. GNP per capita income (in US$), 1999
10000 9000 8000 7000 US dollars 6000 5000 4000 3000 2000 1000 0 Bangladesh
East Asian DCs
Bhutan Cambodia Lao Nepal People's Democratic Republic
South Asian DCs
Republic of Korea
This paper was prepared by Mr M. Aynul Hasan, Chief, Least Developed Countries Section, Development Research and Policy Analysis Division, ESCAP. *
Source: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries (Oxford University Press) various issues.
as India and Pakistan are still below $ 500 whereas those for East Asian developing countries range from over $ 2,000 for Thailand to as high as about $ 8,500 in the Republic of Korea. Given the vastly divergent economic development among the groups of countries, it would be a common myth to presume that the discrepancy in development is somehow inherited by the respective groups of countries. Contrary to this general perception, it is quite an enigma to note that, this had not been the case in the past. In fact, figure I.2 distinctly shows that economic development measured in terms of GNP per capita in the 1960s for all these countries was quite similar and comparable to the extent that all the countries, with the exception of Malaysia, were below the $ 200 mark. Not only that, the Republic of Korea had a per capita income of only $ 130 in 1966, which is even lower than that of Cambodia at that time as shown in figure I.2. Figure I.2. GNP per capita income (in US$), 1966
400 East Asian DCs 300 US dollars
200 Asian LDCs South Asian DCs 100
Cambodia Lao Nepal People's Democratic Republic
Malaysia Republic of Korea
Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries
(Oxford University Press) various issues.
In light of the above, the pertinent question is: what factors led to this exceptional economic development for some countries (i.e., East Asian developing countries) in the last three decades in terms of increasing their GNP per capita income by as much as over 65 times for the Republic of Korea, 13 times for Thailand and about 10 times for Malaysia while, during the same period for Asian least developed countries and South Asian developing countries, only a meagre increase of 2 to a little over 5 times took place? Obviously, the factors could be numerous, ranging from social to cultural, from economic policies to institution development, geographic location to opportune time. In this paper, however, rather than focussing on all these factors together, which of course is beyond the scope of this study, only the socio-economic factors, particularly the human capital dimensions, are briefly investigated across the group of countries to establish the possible role and linkage of human capital with economic development. B. Human capital and economic development Theoretical perspective: What exactly is the role of human capital and other...