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PROJECT TOPIC:  THE ROLE OF HUMAN CAPITAL IN NIGERIANS ECONOMIC DEVELOPMENT
Department:  MBA/MSC
AMOUNT:  10,000
FORMAT:   MS WORD
PAGES:  87
 
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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 1. Introduction The role of human capital in economic growth cannot be overemphasized. The development of human capital has been recognized by economists to be a key prerequisite for a country’s socio-economic and political transformation. Among the generally agreed causal factors responsible for the impressive performance of the economies of most of the developed and the newly industrializing countries is an impressive commitment to human capital formation (Adedeji and Bamidele, 2003; World Bank, 1995; Barro, 1991). This has been largely achieved through increased knowledge, skills and capabilities acquired through education and training by all the people of these countries. Human capital plays a key role in versions of both neoclassical and endogenous growth models (Mankiw, Romer and Weil, 1992; Rebelo, 1991; Sianesi and van Reenen, 2003). The critical difference is that in the first group, economic growth is still ultimately driven by exogenous technical progress, whereas in the second, no additional explanation is needed and human capital is much more important. Endogenous growth models predict that a permanent change in some policy variable can cause a permanent change in an economy’s growth rate. Unlike time series evidence for the US, at first sight the data for many developing economies are broadly consistent with this prediction (Jones, 1995), showing accelerated growth after 1945. The exogenous technical progress of the neoclassical model can change in response to policy as well. According to Parente and Prescott (1999, 2000), the choices of each country’s citizens determine how fast they raise productivity, by diverting their time from normal work to productivity-enhancing activities. In doing so, they can draw on the world stock of knowledge and borrow capital on world markets. Policy-induced constraints, such as taxation, or entry barriers at the plant level, create international differences in aggregate productivity, even when the stock of useful knowledge is common to all countries. It has been stressed that the differences in the level of socio-economic development across nations is attributed not so much to natural resources and endowments and the stock of physical capital but to the quality and quantity of human resources. According to Oladeji and Adebayo (1996), human resources are a critical variable in the growth process and worthy of development. They are not only means but more importantly, the ends that must be served to achieve economic progress. This is underscored by Harbinson (1973) who opined that “human resources constitute the ultimate basis for the wealth of nations. Capital and natural resources are passive factors of production; human beings are the active agents who accumulate capital, exploit natural resources, build social, economic, and political organizations, and carry forward national development. Clearly, a country which is unable to develop the skills and knowledge of its people and to utilize them effectively in the national economy will be unable to develop anything else”. Investment in human capital plays an important role in increasing competitiveness, improving quality of life of the population and in generating economic growth and development of a country. Currently, Nigeria wishes to be among twenty most developed countries in the world by year 2020. To give effect to this, one of the pre-requisites is to ensure that capable manpower is available in various areas of social, political, institutional, technological and economic endeavours which drive

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