Investment in Human Capital and Economic Growth in Pakistan: A Time Series Analysis for CPEC Project

Abstract

The issue that is Pakistan labor market will be fulfill the demand for technical human skill of increasing investment activities in the country under CPEC project which is the main part of china “one belt one road” initiative project. Therefore this study conducted on the bases of time series analysis, aim to investigate empirically the impact of Human capital on economic growth of Pakistan from 1985 to 2016. This study used Labor force of Pakistan as a target independent variable While GDP are used as proxy variable for Economic growth of Pakistan. ADF unit root test, Johansen co-integration, and granger causality techniques were used for long run nexus between the variables while Error Correction Model (ECM) has been used to investigate short run nexus between the dependent and independent variables. The result of various techniques shows that Human capital has statistically significant impact on GDP. The investment in CPEC will required more skillful, technical and non-technical labor force therefore to conclude that human capital recently are more important for economic growth of Pakistan. The empirical result on other side shows that all the define variables in our model accelerate economic growth but labor force for economic growth of Pakistan in short run is more important contributing growth.

Keywords: Human capital, GDP, Labor force, CPEC