Human Capital and Economic Growth in Ethiopia
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Date
2006-07
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A.A.U
Abstract
This study investigates the impact of human capital on economic growth in Ethiopia over
the period 1971-2005 using an error-correction methodology. Contrary to
microeconomic studies. the macroeconomic evidence from this study shows that the
human capital variable in the form of schooling has an insignificant impact on the level
of output. Various analyses are provided in this respect. The deteriorating quality of
education in the wake of significant expansion in the sector is an important element that
puts into question the basic framework that education provides students with growth
enhancing skills. Schooling might not actually be creating the required skills or raising
worker's productivity. Besides. in the wake of a stagnant demand for labor. a rise in the
supply of educated labor could only lead to a decline in the returns.
The study also questions the impacts of the economic policy directions and associated
institutional settings. which could have been perverting the contribution to economic
growth that would have been made from an expansion in educational investment. The key
economic policy implication that comes out of this result is that the provision of
schooling should be geared towards achieving broader socio economic goals with
special emphasis on quality. Simply providing more schooling may yield little or nothing
in the way of economic growth in the absence of other elements such as the appropriate
market and governmental institutions and suitable policy environment in the labor
market and other sectors of the economy to support a functioning modern economy.
Schooling by itself is not a sufficient engine of growth.
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Keywords
Economic Growth, Human Capital