The Impact of Human Capital on Economic Growth: Evidence from Selected Asian Countries

Abstract

The aim of this paper is to find out the role of human capital in economic growth of selected Asian countries namely Pakistan, India, Bangladesh and Sri Lanka. It is based on time series data for the period 19712013. Ordinary Least Squares (OLS) and Cointegration have been used as analytical techniques for this purpose. The results obtained through Ordinary least Squares show that human capital in form of education affects economic growth in all selected countries except India. The relationship is positive and statistically significant. Moreover, physical capital is another significant determinant of economic growth in the study area. When education is replaced by health as human capital, the OLS results demonstrate a little change showing human capital a significant determinant of economic growth but physical capital in case of India becomes insignificant. In order to avoid the doubt of spurious regression, stationarity was checked by using the Augmented Dickey-Fuller (ADF) test and long-run relationship was analyzed by conducting Johansen Cointegration Test. The Cointegration test results confirmed the existence of long run relationship in human capital (education) and economic growth in Pakistan and Bangladesh. Moreover, there is long run association between human capital in form of health and economic growth in Pakistan, India and Bangladesh. It is therefore concluded that human capital in form of health and education is an important determinant of GDP per capita in most of selected countries. It is, therefore suggested to focus on health and education to reap the economies of sustained economic growth.