Role of Human Capital in Economic Development

CHAPTER ONE INTRODUCTION a) BACKGROUND Kenya is one of the s swallow(prenominal) develop countries that be closedownowed with relatively good aims of mental imagerys and tote. However, in that respect be lock in a lot to be done to tap those resources into vi up to(p) harvest-feastivity and industrialization levels. One room of achieving this is by maximizing the enjoyment of some(prenominal) physiological and forgiving seat of giving medication. In or case we shall consider homophile race nifty. valet bang-up, according to Adam Smith refers to the acquired and utilizationful abilities of all the inhabitants or members of the society.The acquisition of much(prenominal)(prenominal) talents by the maintenance of the acquirer, during his direction, see or apprenticeship, eer courts a real expense, which is a neat wintry and realized, as it were in his person. Those talents, as it makes a part of his fortune, so do they similarly to that of the socie ty to which he be colossals. The breakd dexterity of a workman whitethorn be considered in the identical light as the machine or instrument of trade which facilitates and bridges tug and which, though it costs a certain expense, repays that expense with a profit. therefore, the grea running improvement in the successful power of labor and the greater part of the skill, dexterity and judgment with which it is any redact directed or applied, seem to wealthy person been the cause of division of labor. opposite theatrical mappings of great(p) being equally in-chief(postnominal), they passel be provided with ease if the clandestine welkin and the g overnment, by means of with(predicate) public spending hindquarters use the animated gracious with child(p) to develop and widen the superior of the United States old-hat base, both(prenominal)(prenominal) in domestic employment and production of industrial goods. forgiving overw eightsome-spot(p) is wherefore a bouncy factor of production, seemingly the just almost salient(ip) of all the sepa send signs of Capital.Owing to increasing population yield in Kenya, labor is non a hindrance to increment. In fact, con physique trade their work imbibe to the United States of America through the famous Green mailing lottery. at that place is much(prenominal) than this in stinting breeding process. Explaining why slight demonstrable countries be measly, Robert L. Heil Broner, the author of the book, The scotch Problem, 1970, verbalize that these ar poor countries because they atomic number 18 handed-d experience societies, that is, societies that lay down developed neither the mechanisms of command nor of the grocery by which they might launch into sustained process f sparing maturement. He stressed that as he examines the less Developed Countries he start outs a feeling that he is encountering in the present the anachronistic counterparts of the static societies of antiquity. He considered agricultural and industrial majuscule not to be the altogether reason for gloomy productivity and sparingal tuition. To him, an endemic cause of low par capita break throughput and income lies in the prevailing social attitudes that argon vital antigenic de full confinesinant of valet de chambre bully suppuration. Typically, people of underdeveloped miserliness crap not learned the frugal attitudes that foster rapid industrialization.Instead of discipline workers they are reluctant and untrained workers. Instead of product-minded businessmen, they are trading-oriented merchants. Its therefore rattling necessary to inculcate military personnel with child(p) into the saving of less developed countries. b) STATEMENT OF THE PROBLEM What exactly is the habit of worldity bully and an separate(prenominal) social vari up to(p)s in stintingalal harvest-f eastwardboundside and program line of an economy? In the traditional classic al egression exemplifications developed by Robert Solow and Trevor crop in the 1950s, the end product of an economy grows in response to larger inputs of bang-up and labor (all physical inputs).Non frugal inputs such(prenominal) as homo hood of the United States or benevolent considerablyness variables have no liaison in these models. However, the endogenous increment models developed by Paul Romer (1980) broadened the judgment of keen to include the military personnel being chief city. The advent of endogenous ontogeny models with charitablee crownwork (providing externalities) is argued to have enhanced the mind of the mysteries of rapid and long sustainable laid-back branch performance of some development countries.However, to establish the point whether sound tender large(p) was one of the important factors in explaining the economical development for tocopherol Afri smoke countries including Kenya, it give be usable to analyze the overbearing entropy on these variables across the countries. This paper therefore seeks to determine if, indeed, pitying jacket crown has been the factor that has ca utilize a rise in economic development and development in east Africa. c) RESEARCH QUESTIONS ? What is the social occasion of charitable smashing in economic development in east Afri lavatory countries? Is admireable homosexual nifty and former(a) non economic inputs are part of the epitopes of economic growth in east Afri potful countries? d) OBJECTIVES OF THE STUDY ?To have out the role of kind capital in economic development in east Afri stooge countries. ?To determine whether wellnessy pitying capital and revolutionary(prenominal) non economic inputs are part of the determinants of economic growth in east Afri hindquarters countries. e) SIGNIFICANCE OF THE STUDY This speculate is seeking to establish the blood betwixt gay capital and economic growth and development in east Africa.By so doing, we testame nting be able to feel with certainty whether human capital is actually one of the reasons for economic growth in east Africa, in which case the purposes allow for be utilize to establish the right proportion of human capital needed to flux with former(a) economic inputs so as to facilitate sustainable economic development in the role. It besides gives an indication of the possible way to rate human capital against opposite inputs to the economic development of east African community. The checkings of this lead depart help the implementation process of the east African development goals and objectives.This will be possible given the evidence of the role of human capital in economic development, as established in this say. Further more(prenominal), this weigh will in addition shed light to east African states on whether to put a good deal reliability on social conveniences such as hospitals, schools and churches. If the study get under ones skins a compulsory relati onship betwixt human capital and economic development, and so it is left with no more than option scarce to improve on its social amenities and allot more of its resources to the same. CHAPTER TWOLITERATURE REVIEW In this chapter, we will commencement consider past theories depending the field of the study. This is to appreciate the un identical aspects that are of logical implication in our study as has been developed in theories. In the traditional neoclassic models developed by Robert Solow and Trevor Swan in the 1950s, the output of an economy grows in response to larger inputs of capital and labor (all physical inputs). Non economic variables such as human capital or human wellness variables have o function in these models.Furthermore, the economy under such a model conforms to the law of diminishing returns to scale. With these assumptions, the neoclassical growth models feed some implications to the economy particularly that as capital stock increases, growth of e conomy slows down, and in align to keep the economy growing it must capitalize from the infusions of technological progress. It is well slamn that this type of mechanism is the neoclassical model is neither inherent nor does it strive to explain much. In economic lexicon, this simply means that the technological progress is exogenous to the system.Yet the naturalism is quite contrary to that, e redundantly in due east African countries which unploughed over the years. This implies that it is not only engineering which is the main driving twinge accountable for maintaining such racy growth performance in the economies except there are separate factors which are outside the realm of neoclassical growth model. Addressing the above issues, in the mid 1980s, a naked substitution class was developed in literature, virtuallyly due to the Paul Romer (1986), which is now normally known as Endogenous growth models.By broadening the concept of capital to include human capital, th e new endogenous growth model argues that the law of diminishing returns to scale phenomenon may not be unfeigned as is the case for developing countries. In simple basis, what this means is that if the menage which invests in capital likewise employs educate and arch(prenominal) workers who are also wellnessy , then not only will the labor be rich moreover it will also be able to use capital and technology more efficiently. This will lead to the so-called hicks unbiased shift in the production function and thus there can be an increasing rather than decreasing returns to coronation.In separate words, technology and human capital are both endogenous to the system. Indeed, the advent of endogenous growth models with human capital (improving externalities) have certainly enhanced the understanding of the mysteries of rapid and long sustainable gamey growth performance of east African economies. Julie Turcotte & Lori Whelwel Reninson also studied on technology and human capi tal. They examined the effects of facts of animation, t for individually oneing and technology use on productivity and wages at firm level. They made innovative use of statistics in Canadas orkplace and employee survey, which allows the tangencying of characteristics of workers in a firm to firm performance measures. They arrange that productivity is high the intensively the technology is used in the firm, the greater the proportion of university amend workers, the greater the participation of workers in grooming programs the greater the proportion of workers who get computer training the greater the firms export orientation. A key finding with important policy implications is that computer skills training can augment the qualifications of low skilled workers and consequently boost firm productivity.From the theories, therefore, we can correctly postulate that human capital has a role to calculate in economic development of any nation, especially the developing ones the l ike the east African countries Kenya Uganda and Tanzania. CHAPTER THREE METHODOLOGY OF THE RESEARCH CONCEPTUAL cloth The methodology of carrying out this investigate is ideally dependent on the various aspects of human aspects such as human health, upbringing and training. In regard to health, we shall consider the mortality grade of the three countries under study.This study will then seek to show the relationship between mortality rates and the level of economic development in the three countries. In respect to rearing and training, this study will use the level of nurture and other skills acquired through training. It will then determine the relationship between education and training and economic development for each of the three countries under study. Finally, this study will establish the overall electric shock of the different trends in education, training and health on economic development of each of the three countries.If we find that there is a positive relationship , then we shall be able to quit that human capital has a role to play in economic growth and development. On the other hand, if there is a negative relationship, then we dismiss the possibility of human capital playing a role in economic development. RESEARCH MODEL The question model to be developed in this study is that which considers economic growth given by output (y) as a function of both labor and capital, however puts much emphasis on human rather than physical capital.We shall offset printing consider the cob Douglass function given by Q=Af (L, K) where Q is the level of output, K is the level of capital, L is labor and A is technology. Now, if we assume that the measuring stick of labor is sufficiently provided and that technology is constant, then capital will be the determinant factor in production. If we break down capital into fixed bodily capital and human capital we get Q=Af (L,Kp,Kh) where Kp refers to physical capital and Kh refers to human capital.Therefore, output is directly thinkd to human capital, and we have to prove this in our study by utilise relevant variables. DESCRIPTION AND MEASUREMENTS OF VARIABLES The variables to be used in this model will be the both major determinants of human capital. In order t explain the point whether healthy human capital is one of the important factors in explaining the economic development for east African countries, it will be useful to analyze the actual entropy on these variables across the countries.Although there are many variables that can hitherto off human capital and healthy conditions of the people of a nation, to keep the epitome simple succession, at the same time, capturing the basic broad thrust of these both variables, this paper will focus on total literacy rate and liveliness expectancy at giving yield. occur literacy rate will give us an overview of what we expect as the overall level of education and skill development, plot of land life expectancy at birth will d etermine the level of health among the citizens of a nation. This gives the overall level of human capital which we shall relate to the level of output, growth and economic development.Life expectancy at birth refers to a measure of overall quality of life in a unsophisticated and summarizes the mortality at all ages. It can also be thought of as indicating the potential return on enthronisation in human capital and is necessary for the calculation of various actuarial measures. This initiation contains the average number of years to be lived by a root word of people born in the same year, if mortality at each age remains constant in the succeeding(a). Literacy rate on the other hand includes a definition of literacy and census bureau theatrical roles for the total populations males and females.There are no universal definitions and standards of literacy. Unless otherwise stated, all rates are based on the most public definition the ability to infer and write at a specified age. Information on literacy, man not a perfect measure of educational results, is probably the most easily for sale and valid for international comparisons. Low levels of literacy and education in general can impede the economic development of a country in the current rapidly changing, technology-driven world. SOURCES AND TYPES OF DATA The sources of information in our study are basically the inter clear, lecture occupations, library books and journals and magazines.We shall use available data relating to the life expectancy rates and literacy rates from the internet, government documentaries and articles. We shall also use lecture notes and library books to get the theories of scholars and adopt them in our study. The types of data will be of secondary winding nature. It will submit data of theories, findings by other individuals or groups, established models and empirical studies. It will also include government documentaries and public opinions as established in secondary data. DATA psychoanalysisIn analyzing the data, we shall first quantify the value of each variable using the appropriate society p generator schedule. We then tabulate the results, establish the graphs, respect the results, interpret and draw decisions. In summary, the data analysis will involve a systematic process of putting the variables into quantifiable statistics, evaluating them, interpreting and make conclusions. This will include the use of both geometric and mathematical analysis. orbital cavity AND LIMITATIONS OF THE STUDY This study will be carried out within Kenyatta university expound in a period not less than three months and not more than four.It will include visits to the library, use of Kenyatta university computers, discussions with Kenyatta university students especially from the school of economic science and also consulting lecture notes, perhaps in the study room or in the hostels. There are some limitations to this study just like any other kind of stu dy. First is the intermittent network also-ran in the school computers. There is also the problem of inadequate books in the library and the school policy not to allow undergraduate students to opening research materials from the Africana section of the library.Worse still, is the problem of shallow coverage of the computer program content by lecturers and the students tendency not to cooperate in discussions. CHAPTER quaternary INTRODUCTION The world today is very different from the one which experience 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 politicss and strengthening of institutions, have led to square 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 East African region is the existence of important d ifferences in the state of economic development among countries. For instance, when GNP per capita income is deal outn as an indicator of economic development (see epitome 1. 1), the embarks for Kenya, Uganda and Tanzania. Fig 1. 1 1999 KENYA 1600 UGANDA 1060 TANZANIA 550 2000 1500 1100 710 2001 1000 1200 610 2002 1020 1260 630 003 1000 1400 600 2004 1100 1500 700 2005 1100 1800 700 2006 1200 1900 800 2007 1700 1000 1300 2008 1600 1300 1300 2009 1600 1200 1400 2010 1600 1300 1400 Given the immensely divergent economic development among the three countries, it would be a common myth to presume that the discrepancy in development is somehow communicable 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 1. 1 distinctly shows that economic development heedful in terms of GNP per capita in the early 2000 for these coun tries except Kenya was quite similar and comparable to the extent that they were at a lower place 1200 USD mark. In light of the above, the pertinent question is what factors led to this exceptional economic development for some countries (i. e. , East African developing countries) in the wear three decades?Obviously, the factors could be numerous, ranging from social to cultural, from economic policies to institution development, geographic jam to opportune time. In this paper, however, rather than focusing 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 tie-inage of human capital with economic development. HUMAN CAPITAL AND ECONOMIC phylogenesisIn inspecting the total literacy rate data for various East African countries in figure 1. 2, it is intriguing to note that even off in the nineties when most of these countries were at similar stages of economic development, Kenya was remote ahead of both Uganda and Tanzania. In fact, the total literacy rates for Kenya in 1995 was as high as 78. 1 per cent, 67. 8 per cent for Tanzania and even Uganda had a rate of over 61. 8 per cent. After three decades, speckle Kenya and Tanzania have somewhat ameliorated their human capital, the total literacy rates are still far infra 70 per cent in the case of Uganda as shown in figure 1. . During the same period, however, Kenya and Tanzania have more or less achieved the formidable task of educating most of their people. As a result, in the late 2003, the total literacy rate of the republic of Kenya has reached 85. 1 per cent and Tanzania managed to achieve a rate of about 78. 2 per cent. Fig 1. 2 KENYA UGANDA TANZANIA 1995 78. 1 61. 8 67. 8 2000 62. 7 2002 66. 8 69. 4 2003 85. 1 69. 9 78. 2 Analyzing the health variable measured in terms of life expe ctancy at birth across the three groups of countries in the East African region, like the literacy rate, again a similar sort of pattern is unmingled among these countries. For instance, in 2000, all East African countries had a Life expectancy at birth below 50 years except Tanzania with Uganda having a figure of even much less than 45 years as shown in figure I. 3. On the other hand, during the same period, Tanzania had a life expectancy at birth well over 50 per cent with the Republic of Kenya having a figure almost 50 years (47. 98 years).In 2011, although East African countries enhanced their life expectancy to a level of over 50 years, Tanzania and Uganda, in this setting, is far more stagnant, as shown in figure 1. 3. In the case of Kenya, the life expectancy rate is now in the order of over 55 years. Fig 1. 3 KENYA UGANDA TANZANIA 2000 47. 98 42. 93 52. 26 2001 47. 49 43. 37 51. 98 2002 47. 02 43. 81 51. 7 2003 45. 22 44. 88 44. 56 2004 44. 94 45. 28 44. 39 2005 47. 99 51. 59 45. 24 2006 48. 3 52. 67 45. 64 2007 55. 31 51. 75 50. 71 2008 56. 64 52. 34 51. 45 2009 57. 86 52. 72 52. 01 2010 58. 82 52. 98 52. 49 2011 59. 48 53. 24 52. 85 What can one infer from the discussions so far? First of all, the empirical data overpoweringly incarnate that, in the past decade, the three East African countries considered in this paper started with a similar state of economic development but now, in 2011, there is a marked difference among them on account of their per capita incomes.Kenya is now well beyond the reach of Uganda and Tanzania in 2011 in terms of economic development. Tanzania, on the other hand, is overtaking Uganda as depicted by the economic growth in terms of gross domestic product per capita in 2011 in fig. 1. 2. Secondly, although in terms of per capita income all these countries were quite comparable in the early 2000, nevertheless, in the context of human capital and health sector development , there were huge differences among them Kenya and Tanzania were, by far, ahead of Uganda. In the 1990s, most Kenyas population were literate musical physical composition Uganda and Tanzania still had a long way to go.Thirdly, based on the facts presented in the first place, it is evident that the onslaught of East Africa developing countries rapid economic progress in the 1990s occurred along with their reasonably well developed and healthy human capital endowment which started to take momentum in the 1960s or even earlier. It is the view of the author that, for human capital to spawn a perceptible stir on economic development, a nation needfully to have a minimum captious mass of at least(prenominal) 70 per cent or more literate population.What this means is that if an overwhelmingly large number of people in a country are literate, even with simple basic education as being able to read newspapers, this may open up the minds of the battalion, possibly make them more enlight ened workers and perhaps institute some element of discipline in them. These are, of course, some of the essential prerequisites for a large organized production to phlebotomise efficiently and for leading to rapid growth.Through mass literacy, interrupt active healthy workers and conducive investment friendly government policies, Kenya and Tanzania seem to have been able to furnish those essential elements of rapid growth at the very early stages of their development. And, therefore, at the dawn of globalization in the early 1980s, Kenya and Tanzania were suitably prepared to attract large sums of foreign investments thus accomplishing rapid economic progress. On the other hand, during the same period, unfortunately Uganda was neither primed in terms of human capital endowments t large nor were its government investment policies responsive enough to allure foreign investors in surfaceable quantities to actuate rapid economic growth. Thus, in a mere two decades, Uganda lagged far behind Tanzania and Kenya to the extent that any whatsising up in the near future by the former country to the level of the latter countries would be a very challenging onus. As shown by the gross domestic products per capita, Kenya still maintains its lofty level of 1600 USD as it was in 1999 and Tanzania has rose fast to 1400 USD from 550 USD of 1999.On the other hand, Uganda seems to stagnate around 1300 USD. These results are due to the well developed human capital base depicted by literacy rates and life expectancies of Kenya and Tanzania in figures 1. 3 and 1. 4 respectively. What led to the divergence in human capital among nations? As demonstrated above, a well developed human capital base of a nation played an important role in economic development and, on this count, Kenya and Tanzania were far ahead of Uganda even at the early stages of economic development.A germane public policy question, in this context, is how Kenya and Tanzania managed to delude such a well dev eloped human capital base as compared to Uganda even when the per capita incomes for all these countries were rather similar as shown earlier. In other words, for all practical purposes, in the 1990s, all these groups of nations could be contemplated as equally rich or equally poor, yet in terms of human capital development they were distant apart from each other.What led to this crucial divergence in the human capital development among these groups of countries? This study argues that it is the direction of a nations priorities and payloads measured in terms of actual resources devoted towards the education sector that led to such differences in human capital among the groups of countries. Since independence and now in the new millennium, however, the disparities in per capita disbursement on both education and health between the three countries are staggering.For instance, data from CIA world fact book shows that the Kenyas government expenditure on education as a percentage o f GDP in 2006 was 7%. Ugandas spending on education as a percentage of GDP was 3. 2% in 2009 while that of Tanzania in 2008 was 6. 8%. The world fact books data governments spending on health in the eventually decade also shows that Kenya spends more as a percentage of GDP as compared to Tanzania and Uganda. Kenyas spending was 12. 2%, Ugandas spending was 8. % while that of Tanzania was 5. 1%. These data show that Kenya spends more of its GDP on health and education than any other east African country. Therefore, it is correct to word that a country which is committed to providing education and good health to its citizens is able to make use of its human development in an economically productive manner, hence raising its GDP per capita and its economic growth and development. CHAPTER FIVE gestation period period PERIOD FOR HUMAN CAPITAL INVESTMENTGiven the acceptation of human capital investments towards Economic development, a pertinent question is whether the time taken or th e gestation period of such investments to proliferate intended tinct in terms of literate skilled workers is comparable to that of physical pedestal investments such as roads, highways and hydroelectric dams. It needs to be underscored that, while the physical stand investments may ordinarily take a long time to be completed, however, the impact period for human capital investments could be even longer if it is to forge results.Not only that, while it may even be possible to abbreviate the gestation period of physical infrastructure investment by apportioning more resources through borrowing or foreign aid, the same cannot be said for human capital. Notwithstanding of the size and pace of human capital investments, it will necessitate a fixed number of years (say five years for a primary high school or eight years for secondary education) to shape a generation of better and skilled labor force.Another important billet between physical infrastructure and human capital investment s is that the former type of investment customarily requires one-time capital expenditures while the latter category enjoins investments on an interminable basis. For instance, once a hydroelectric dam project is completed, it is judge to generate electricity for a long time without entailing future heavy capital expenses. On the other hand, to mould a generation of educated workers will entail investments in human capital on an aeonian basis.Thus, the return of the social sector investment is a long term continuous mesmerism and, therefore, its affiliation with economic growth and development should be delved and analyzed within a framework which has a longer perspective. This proposition is also empirically substantiated by the author for Pakistan in two other earlier studies (Pasha, Hassan et al, 1996a, and 1996b). Based on a large, over 200 equations high-powered econometric model of Pakistan, the findings of these studies insinuated that a shift in the investment precessio n to social development (i. . , education sector) would entail enduring positive impact on economic growth but with long lags of about eight years. The results of the studies further suggested that, in the short to medium term, the impact of human capital investment on economic growth for the country may not be noticeable however, after the critical time period of eight years the economic growth for the country will be genuine and long-lasting. CONCLUSION How relevant is this study to public policy?First of all, the study empirically found out that in the past decade, among other things, the east African nations broad based healthy human capital (such Kenya and Tanzania) grew sudden than the ones with less human capital investment (such as Uganda), where the elements of human health were missing. Thus, the empirical results in this study corroborated the premise that there is an important link between healthy human capital and rapid economic development of any country. This link c an be elaborated mathematically by filiation the cob Douglas function and modifying it to include the aspect of human capital.In this sense, we take a countrys GDP delineated by its output Q as a function of labor, human capital and physical capital. The function is represented by the linear equation Q=Af (L,Kp,Kh) where Kp refers to physical capital and Kh refers to human capital. Therefore, output is directly link to human capital, just as the results of our study have shown. Secondly, the study also found that, under similar economic Predicaments with comparable per capita, Kenya and Tanzania were investing far more in human capital and health sectors on a per capita basis than Uganda.This result substantiated the point that it is the commitment and priority of a nation rather than other economic factors completely that led to more economic growth and development in Kenya and Tanzania as compared to Uganda. Even when they were all equally endowed with resources, and in fact Uganda was doing better in earlier years than Tanzania in terms of GDP per capita, but is now lagging behind. Thirdly, it is important to acknowledge the fact that there is a distinction between investments in human capital versus physical capital.The finding of the study, in this context, upholds the view that, while it is possible to cut down the gestation period of physical infrastructure the same outcome, however, may not be possible for human capital investment. Unlike physical infrastructure investment, human capital development investment is a long term as well as continuous proposition. Commitment and public policy are very simple and unpretentious. In the 1990s, most countries in the east Africa were signally analogous in terms of their economic development.However, at the dawn of the new millennium, although Kenya and Tanzania have made some economic progress, these countries are still attributed to their earlier copious investments made in human capital. What policy opti ons and choices are available to the Uganda under the prevailing circumstances to improve economic development and to catch up with the other east African countries? It is the view of the author that it will have to adopt similar policy options that Kenya and Tanzania did in the 1960s that is, to deeply commit and heavily invest in human capital development.This study has shown that there is no shortcut procurable in terms of educating the masses of a nation and in the event these countries demonstrate any laxity in building up a broad human capital base sooner than later. This is likely to be a recipe of postponing the impending quagmire to a future date. REFERENCES Hafiz Pasha, M. Aynul Hasan, Aisha Ghaus and M. Ajaz Rasheed, Pakistan, Pakistan using Review 579. , 1996b. An integrated cookery model and expenditure on social development the case of Pakistan, 2) Romer, Paul, 1986. change magnitude returns and long-term capital, Journal of Political Economy, Vol. 94, pp. 1002- 1020. Wishart, M. D. , Principles of Microeconomics, 4e, 2005. Stamford, Thomson publishing. Robert, L. H. , The Economic Problem, 2e, 1970. New Jersey, Englewood. http//www. ciafactbook. com http//www. gisdevelopment. net Republic of Kenya (1965). African Socialism and its Application to Planning in Kenya, Nairobi. Government press. Todaro, M. P. , Latest edition, Introduction to Economics for a Developing World. Oxford. Chapter 24.Role of Human Capital in Economic DevelopmentIntroduction Our research upshot is to analyze the relationship between human capital and economic growth. Economic growths important determinant are physical capital, labor and human capital. only if from the new-fashioned trend of world economic growth, we found that human capital is playing a key role by taking the place of material capital and labor. Human capital is tight related to growth as it increases the nations efficacy to let on goods and helpers. It also creates more Job opportunities and l ifts the accompaniment standards of a country through increase in income levels.Human apital deals with individuals who learn special skills and knowledge pipe bowl education at school, training and experience in the labor marketplace (Barro et al, 2000). However, Economic growth refers to the increase in the amount of the goods and services take a crapd by an economy over time Cones, 1996). As a result of their skills and education, productivity level would increase because educated workers would work at a fast-breaking pace than less educated workers Human capital refers to the knowledge and skills embodied in people.It is widely recognized that some types of human capital are obtained through experience or nteractions with others and with formal education. Human capital is intimately related to the economic growth. Masses believe that capital means a slang account, stock or factory plants in the industrial discipline. These are also a type of capital that they are assets t hat increase income and other useful outputs over long periods of time. nevertheless such tangible forms of capital are not the only type of capital.There is other very important type of capital known as human capital. It implies to Schooling, a computer training course, expenditures on medical care, and lectures on the virtues f punctuality, expertise and honesty. It is because these factors are also alter to raise salary, improve health, or over all increasing the economic growth rate. Therefore, economists regard spending on training, medical care, education and so on as investments in human capital.They are called human capital because people cannot be disjunct from their knowledge, skills, health, or values in the way they can be disjointed from their financial and physical assets. The notion of human capital arose out of the sentience that physical capital alone was not enough to explain long term growth. Many social indicators such as educational enrolments and life ex pectancy became combined in a common term human capital. Often, human capital is implicitly referred to as formal and informal education.Yet, it can also contain factors such as the costs of raising children, health costs, and ability. Significance Economic gr n depends on many tactors such as the quantity and quality ot education, how education can impact on foulness rate, government policies to sustain incentives for human capital, a reduction in the cost of technology adoption and increase expenditure on education. statement and other aspects of human capital is important to economic growth because more educated individuals tend to have high employment rate and earnings and produce more output relative to those who are less educated.Education is considered as a positive investment that allows individuals to be equipped with knowledge and skills that can improve their employability and productive capacities that would lead to high earnings in the future and hence, economic gro wth. Moreover, it has shown that it is not only the amount of formal education that matters, but also that the type of knowledge ossessed by labor in a region also plays a key role in determining the level of economic activity.There are various type of education having there own effect on the economic growth such as skilled based education primary education narrow down education higher education and education to develop entrepreneur skills, the more the entrepreneurs are in a country, more the business will pageant in that country. As a result, the countrys economy will rapidly grow. The continuing growth in per capita incomes of many countries during the nineteenth and 20th centuries is partly due to the expansion of scientific and echnical knowledge that raises the productivity of labor and other inputs in production.And the increasing conviction of industry on sophisticated knowledge greatly enhances the value of education, technical schooling, on-the-Job training, and other human capital. New technological advances distinctly are of little value to countries that have very few skilled workers who know how to use them. Investment in human capital is long term as compare to the investment on physical capital. It is also a continuous process different investment on physical capital. But the outcome of human capital is much greater than other investment. In past decades the healthy human capital countries grew faster than the one where these factors were missing.Economic growth closely depends on the synergies between new knowledge and human capital, which is why large increases in education and training have accompanied major advances in technological knowledge in all countries that have achieved significant economic growth. The smashing economic records of Japan, Taiwan, and other Asian economies in recent decades dramatically illustrate the importance of human capital to growth. We are press release to support the positive orrelation of human capit al and economic development by reference on some previous conducted researches.Maudos, Pastor and Serrano aimed to find the role of human capital in the productivity gains of OECD countries form 1965-1990. There research supports the correlational statistics of human capital and economic growth. Their findings suggest a positive the link between human capital and economic development. They reason out that human capital not only is an additional input in the production pattern but also is a catalyst for technical change. Thus, the approximation of a stochastic translog production unction shows a statistically significant product elasticity of human capital, and non- parametric techniques confirm its significance as input.Xu, Qi came to conclusion in the research conducted in 2008 that human capital is contributing towards Total factor production (TFP), which is contributes directly to economic development. They concluded that human capital had lower impact in technologically abso lute provinces compared technologically feebleminded provinces. We have seen that human capital have an impact on the growth rate. But there is various composition of human capital. Various composition of human capital has different impact on the economic growth.Role of Human Capital in Economic DevelopmentOur research topic is to analyze the relationship between human capital and economic growth. Economic growths important determinant are physical capital, labor and human capital. But from the recent trend of world economic growth, we found that human capital is playing a key role by taking the place of material capital and labor. Human capital is intimately related to growth as it increases the nations capacity to produce goods and services. It also creates more job opportunities and lifts the living standards of a country through increase in income levels.Human capital deals with individuals who learn special skills and knowledge trough education at school, training and experienc e in the labor market (Barro et al, 2000). However, Economic growth refers to the increase in the amount of the goods and services produced by an economy over time (Jones, 1996). As a result of their skills and education, productivity level would increase because educated workers would work at a faster pace than less educated workersHuman capital refers to the knowledge and skills embodied in people. It is widely recognized that some types of human capital are obtained through experience or interactions with others and with formal education. Human capital is intimately related to the economic growth. Masses believe that capital means a bank account, stock or factory plants in the industrial area. These are also a type of capital that they are assets that increase income and other useful outputs over long periods of time. But such tangible forms of capital are not the only type of capital.There is another very important type of capital known as human capital. It implies to Schooling, a computer training course, expenditures on medical care, and lectures on the virtues of punctuality, expertise and honesty. It is because these factors are also contributing to raise earnings, improve health, or over all increasing the economic growth rate. Therefore, economists regard spending on training, medical care, education and so on as investments in human capital. They are called human capital because people cannot be separated from their knowledge, skills, health, or values in the way they can beseparated from their financial and physical assets.The notion of human capital arose out of the awareness that physical capital alone was not enough to explain long term growth. Many social indicators such as educational enrolments and life expectancy became combined in a common term human capital. Often, human capital is implicitly referred to as formal and informal education. Yet, it can also contain factors such as the costs of raising children, health costs, and ability.Signi ficanceEconomic growth depends on many factors such as the quantity and quality of education, how education can impact on fertility rate, government policies to sustain incentives for human capital, a reduction in the cost of technology adoption and increase expenditure on education. Education and other aspects of human capital is important to economic growth because more educated individuals tend to have higher employment rate and earnings and produce more output relative to those who are less educated.Education is considered as a positive investment that allows individuals to be equipped with knowledge and skills that can improve their employability and productive capacities that would lead to higher earnings in the future and hence, economic growth. Moreover, it has shown that it is not only the amount of formal education that matters, but also that the type of knowledge possessed by labor in a region also plays a key role in determining the level of economic activity.There are v arious type of education having there own effect on the economic growth such as skilled based education primary education specialized education higher education and education to develop entrepreneur skills, the more the entrepreneurs are in a country, more the business will flourish in that country. As a result, the countrys economy will rapidly grow.The continuing growth in per capita incomes of many countries during the nineteenth and twentieth centuries is partly due to the expansion of scientific and technical knowledge that raises the productivity of labor and other inputs in production. And the increasing reliance of industry on sophisticated knowledge greatly enhances the value of education, technicalschooling, on-the-job training, and other human capital.New technological advances clearly are of little value to countries that have very few skilled workers who know how to use them. Investment in human capital is long term as compare to the investment on physical capital. It i s also a continuous process unlike investment on physical capital. But the outcome of human capital is much greater than other investment. In past decades the healthy human capital countries grew faster than the one where these factors were missing. Economic growth closely depends on the synergies between new knowledge and human capital, which is why large increases in education and training have accompanied major advances in technological knowledge in all countries that have achieved significant economic growth.The outstanding economic records of Japan, Taiwan, and other Asian economies in recent decades dramatically illustrate the importance of human capital to growth. We are going to support the positive correlation of human capital and economic development by reference on some previous conducted researches.Maudos, Pastor and Serrano aimed to find the role of human capital in the productivity gains of OECD countries form 1965-1990. There research supports the correlation of human capital and economic growth. Their findings suggest a positive the link between human capital and economic development. They concluded that human capital not only is an additional input in the production formula but also is a catalyst for technical change.Thus, the estimation of a stochastic translog production function shows a statistically significant product elasticity of human capital, and non-parametric techniques confirm its significance as input. Xu, Lai, and Qi came to conclusion in the research conducted in 2008 that human capital is contributing towards Total factor production (TFP), which is contributes directly to economic development. They concluded that human capital had lower impact in technologically strong provinces compared technologically backward provinces.We have seen that human capital have an impact on the growth rate. But there is various composition of human capital. Various composition of human capital has different impact on the economic growth. There can be different composition of human capital land human capital (AGR) high-techhuman capital (TECH) business and service human capital (SERVICE) the humanities human capital (HUMAN) and health and upbeat human capital (HEALTH). These divisions are done by Chun-li Tsai, Ming-Cheng Hung, and Kevin Harriott in their research conducted in 2010. They concluded that, secondary education is a large contributor to economic growth in developing countries than it is in developed countries.However, they find tertiary education also plays an important role in economic growth equally for both developing and developed countries. The findings also signalise high-tech human capital is positively correlated with economic growth. It indicates that a country should promote greater enrolment in high-tech palm of study, that is, the percentage of tertiary graduates in science, engineering, mathematics and computer science is an important indicator of high-quality labor-force. It provides skilled and specialized labor to work with hi technology.Daren A. Conrad conducted a research on four Caribbean countries he divided them in two groups according to the nature of the development. he concluded that countries with high development condition in Caribbean which are Barbados and Trinidad & Tobago. The human capital contribution in these countries is high towards economic development in all sectors. However, in less developed countries which includes (Guyana and Jamaica), the human capital contribution is low in tertiary sector because in these countries the human capital is not very much developed because of lack of resources on education compared o developed countries. In the end this research paper does give concrete reasons of dependency of economic development on human capital.Teixeira and Fortuna (2004) in their research paper made a conclusion that the main estimation results emphasize that human capital stock and internal innovation capability (internal stock of knowledge) a re important in explaining Portuguese productivity during the period of study which is from 1960 to 2000.Nazneen ahmed and Joseph French had shed light on the casual relationship between growth rate and human capital in developing countries such as Bangladesh. Their studied the Bangladesh economic growth in relation with its human capital. Bangladesh, like other developing nations, depends uponproduction processes that are largely labor intensive. according to Nazneen Ahmad and Joseph French, These results indicates that increases in human capital have a propensity to follow increases in per capita GDP and at the current state of the economy, emphasis on secondary and higher secondary education should be a priority for Bangladesh.Secondary and higher secondary education are imperative because of the labor-intensive nature of the Bangladeshi economy. once again this research gives importance to the composition of human capital and type of education imparted to the labor. Skills acqu ired from secondary and higher secondary levels of education are in utmost(a) demand and as their results show, contribute considerably to economic growth in Bangladesh.Musila Jacob and Belassi Walid in their research emphasized on the fact that government expenditure on the human capital can be an important determinant to analyze this relationship of human capital and economic growth. Government expenditure on education would also have an impact on the economic growth. Moreover investment on growth can be represented as the investment on the human capital. As government will spend more on educating the human capital, more will be the skilled labor to positively contribute towards the economic growth of the country. seed investigated that the increase the government expenditure on the education would increase the economic growth. That the average education expenditure per worker positively correlates with the economic growth.LR test indicate that education expenditure in the model are lame exogenous, suggesting therefore, that they drive economic growth. Government expenditure on education in the long term investment to increases the economic growth of the country. This research clearly proves the point that how human capital contributes to economic growth.Ruth Judson in 1998 tried to find answers to two questions. First, does investment in education help growth second, does the parcelling of investment in education matter? He came to conclusion that if allocation is the done in organized manner in different levels of education, then countries can gain more from human capital.He is trying to make a point that that human capital speeds up the economic development so it isnecessary that one develops them in best possible manner by allocating appropriate investment in different levels of education. He says that basic education is most important as it lays insane asylum for further education, so it can be concluded that, countries should emphasis greatly on b asic education in order to gain maximum for human capital as human capital is catalyst for economic growth.Education is empowerment. It is the key to establishing and reinforcing democracy, and development, which is both sustainable and humane. It is also the only avenue for a lasting peace treaty founded upon the mutual respect and social justice. Indeed, in a world in which creativity and knowledge play an ever-greater role, the right education is nothing less than the right to participate in the modern world.(UNESCO, 1998).Vladmir tries to prove this relation by using two models. He uses Lucas model and Nelson-Phelps approach. The Lucas model establishes that the driving force behind economic growth is the rate of accumulation of human capital. On the other hand, the NelsonPhelps approach considers that high levels of human capital increase the capacity of individuals to innovate (by discovering new technology) or to adopt new technology. Thus, again it can be said that human ca pital is one of the major column of economic development.Abel J.R and Todd M.Gabe in their research prove empirically the dependence of economic growth on human capital. By using educational acquisition as an indicator of human capital, it is found that a 1 percentage point increase in the proportion of residents with a college degree is associated with about a 2% increase in US metropolitan area GDP per capita.ConclusionThrough above discussion it can be clearly claimed that there is a positive relationship between human capital and economic development. They both are directly proportional to each other nerveless human capital would slow down the economic growth. On the other hand, strong human capital would acceleratethe economic growth. Human capital is very important to nations development and it cannot be neglected.Neglect of human capital would negatively impact the economic growth. Furthermore, it can be said that it is important to invest on basic education as it lays fou ndation for other important skills and further education. Human capital is a resource on which countries build and it should be polished as economic growth is dependent on skilled human capital.