Human Capital and Economic Growth in Ethiopia

No Thumbnail Available



Journal Title

Journal ISSN

Volume Title


Addis Ababa University


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.



Economic Growth in Ethiopia