Human Capital Development and Economic Growth in Nigeria

Abstract

This paper examines the impact of human capital development on economic growth in Nigeria. Theoretical growth models and macroeconomic evidence suggest that human capital accumulation is an important determinant of per capita income growth. However, Hideki et al. (2005) note that outliers, measurement errors, and incorrect specifications may have affected early macroeconomic studies that found a weak relationship between growth and human capital accumulation. While recent studies addressing these problems are beginning to show larger positive effects, the potential endogeneity of human capital accumulation has received relatively little attention. We therefore investigate the relationship between human capital and economic growth in Nigeria with time series data which covers periods 1981-2010. Adopting the endogenous modeling approach cast within the autoregressive distributed lag (ARDL) framework, the bounds testing analysis indicated existence of co integration between economic growth and human capital development indicators. Findings also show that human capital development indicators had positive impact on economic growth in Nigeria within the reviewed periods; however, their impacts were largely statistically insignificant. Further evidence indicated that equilibrium is fully restored for any distortion in the short-run. On this basis of the emanating findings, this study proffered the need for government to invest more in human capital development process and endeavours prioritize the health and education sectors budgeting considering their growth driving potentials in Nigeria. Similarly, government should endeavour to pay attention to the issue of school enrolment.

Keywords: Bounds Test, Economic Growth, Endogeneity, Human Capital Development,  Nigeria