The Impact of Human Capital on Economic Growth in Ethiopia

Abstract

In contemporary economics literatures human capital accumulation is considered as one of the major determinants of economic growth. To this effect, this study used empirical econometric model to analyse the impact of education and health (human capital) on economic growth from 1980-2013 in Ethiopia. Human capital stock is proxied by primary, secondary and tertiary school enrolment. Human capital investment is proxied by expenditure on education and health.  Augmented Dickey Fuller test and Johansen’s Co-integration technique were used to test unit root and to validate co-integration among variables, respectively.  The findings of the study have shown public expenditure on health and education, primary and secondary school enrolment have positive statistically significant effect on economic growth both in long run and short run. In addition, physical capital has positive whilst inflation has negative effect on economic growth. However, tertiary school enrolment has insignificant effect on economic growth both in long run and short run. Based on these findings exceling an effort to increase primary and secondary school enrolment is recommended. In addition, substantial amount of government expenditure should be allocated towards health and education sectors to further increase contribution of the sectors to economic growth.

Keywords: Economic Growth, Health, Education, Time Series Model, Human Capital