The Impact of Human Capital Development on Economic Growth in Ethiopia
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Date
2021-02
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Addis Ababa University
Abstract
Human capital is one of the required conditions to attain sustained economic growth. This study investigates the impact of human capital development on economic growth in the Ethiopian case, throughout the period from 1981 to 2019. Meantime, by subdividing human capital development into education and health human capital the study examines the impact on economic performance. Moreover, the study uses the autoregressive distributed lag (ARDL) technique of co integration and Error Correction Model (ECM) are applied to look at the short and long term impact of human capital development. The result shows that except for short run health human capital has a significant positive impact on economic performance. However, education human capital has an insignificant and significant negative impact on economic growth in the short and long run respectively. The error correction term is a negative sign and statistically significant at the level of 1%, Showing that the deviation of the previous year fairly adjusted. We will conclude that in the workplace there is incompatibility with essential skills and additionally the education quality is poor. Besides, an improved life expectancy rate may boost economic growth within the long
standing time. Therefore, policymakers and the government ought to reform education establishment capability and commit plenty of funds to the health sector to strengthen human capital development.
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Keywords
Economic Growth, Human Capital development, Health, ARDL method of Co integration, Error Correction Model, Error Correction Model