Empirical Analysis of the effect of Human Capital generation on Economic Growth

Last decade of 20th century faced a strong quest for the determinants of the rate of long run economic growth. Post-World War II, human capital emerged as an important and inevitable factor apart from other general factors that affect the rate of growth. Initially, enhancement in general education was encouraged to promote human capital, but presently, advancement in technological progress for skill development has gained special attention for its contribution to the formation of human capital. According to economists and existing theories of growth, a nation that invests in human capital generation should contribute positively in the process of economic growth. Human capital embodies qualities that are inherited as well as acquired through education and training. The returns to investment in human capital not only help individuals to enjoy personal growth but in addition affect the growth of the nation as an aggregate. Human capital enters into the production process through the participation of the labourers. The already existing labour productivity gets improved when subjected to skill improvement through technological knowledge building and on-the-job training. This further leads to a positive impact on the production of goods and services paving way for economic growth. But distribution of human capital has seen its shortcomings as well that has given rise to some of the major issues and challenges for policymakers.