Human Capital Development and Economic Growth: A Panel Data Analysis

Abstract

Pakistan, like other developing nations, is actively pursuing economic development initiatives. Recognizing the significance of human capital investment, the government prioritizes education, skills, health, and overall well-being as key drivers of sustainable growth. This study examines the intricate relationship between human capital and economic growth through an analysis of panel data from eleven countries spanning 1992 to 2014. By utilizing advanced econometric techniques, the study provides a comprehensive understanding of the role of human capital in fostering economic development. The panel data approach allows for an in-depth exploration of collective experiences across diverse economies over time. Gross Domestic Product (GDP) serves as the primary economic indicator, while human capital indicators include net secondary school enrollment (education investment), health expenditures (health investment), total labor force (size of the labor market), and life expectancy at birth (population health). To ensure analytical rigor, the study employs the Panel Augmented Dickey-Fuller (ADF) unit root test to assess variable stationarity, followed by the Pooled Ordinary Least Squares (OLS) test to examine initial relationships. The findings reveal compelling evidence of a long-term relationship between real GDP and human capital, as demonstrated by the fixed-effects OLS test. This underscores the crucial role of human capital accumulation in driving economic growth. Policymakers must enhance investments in education and health to foster sustainable development. By strengthening human capital, developing nations can achieve higher economic performance, reinforcing the vital link between human resource development and long-term prosperity.