Impact of Human capital on Economic Growth: Evidence from Pakistan

Abstract

Human capital is an intangible source managed mutually by the individuals and groups within the population. Many social indicators such as school enrolments, life expectancy, health, knowledge, and skills are collectively known as human capital. Usually, it refers to formal and informal education. In this study, we have considered formal education as an indicator to assess the impact of human capital on real GDP. The average weighted education level is used as a proxy for the human capital. The results of Johansen co-integration show, that human capital and economic growth are cointegrated, as there is a long run relationship between the two. Further, there is a need to invest in educational sector to maximize the human capital, which not only helps in economic growth but also contributes to economic development of the country.