Human capital on Economic Growth

Human capital and Economic growth are related to each other. Human capital influences economic growth and can generate an economy through knowledge and abilities.

Meaning of Human Capital

Human capital refers to the stock of skill, ability, expertise, education and knowledge in a nation at a point of time. We need investment in human capital to produce more human capital out of human resources.

Nations require adequate human capital who are educated and qualified as educators and other specialists. In other words, we need great human capital to create other human capital like doctors, engineers, professors, etc which later will become a human asset and contribute to the economy of the country.

Quick link: Impact of Human Capital on Economic Growth

Impact of Human Capital on Economic Growth

When we talk about economic growth, human capital is the main reason for accelerated growth and expansion for many countries, which provide investment in human capital. This gives the best advantages to these countries for providing the best situation for work and life.

A significant advantage in generating a stable environment for growth is that the nation has the expanded high-quality human capital in fields like health, science, management, education, and other fields. Here the main components of human capital are definitely human beings, but presently, the principal component is creative, an educated, and enterprising person, with a high level of professionalism.

The human capital in the economy manages the central portion of the national wealth of the country. Hence, all researchers consider that human capital is the most important resource of the community, more powerful than natural or wealth. In most countries, human capital determines the rate of development, economic, technological and scientific progress.

(i) Inventions, Innovations and Technological Improvement

1. It will lead to more innovations in the areas of production and related activities.

2. Innovation leads to more growth.

3. It also creates the ability to absorb new technologies.

(ii) Higher Productivity of Physical Capital

1. Human capital increases labour productivity.

2. Trained workers will use the physical capital (like machines etc.) more efficiently.

(iii) Raises Production

1. Human capital formation raises production levels and leads to economic growth by adding to GDP.

2. Knowledgeable and skilled workers can make better use of resources at their disposal.

(iv) High Rate of Participation and Equality

1. By improving productive measures of the labour force, human capital formation increases excellent employment.

2. This leads to a high rate of participation in the labour force.

3. It reduces the gap between poor and rich.

(v)Improves the Quality of life

1. Quality of life is indicated by income and health.

2. Income and health depend upon the level of education, skill formation, etc.

3. Human capital formation increases these skills and improves the quality of life of masses.

4. Better quality of population means more economic growth.

Short Questions:

1) What is human capital formation?

Ans:

  • Human capital formation refers to the process of adding to the stock of human capital over time.
  • It is the process of acquiring and increasing the number of skilled and experienced people.
  • It is essential for the development of an economy.

2) What is physical capital?

  • Human development is based on an idea that education and health are an integral part of human only when people have it to apply their knowledge to derive maximum benefit.

4) What is human development?

  • Human development is based on an idea that education and health are an integral part of human only when people have it to apply their knowledge to derive maximum benefit.

Multiple Choice Questions:

Q.1 ____________refers to the stock of skill, ability, expertise, education and knowledge in a nation at a point of time.
a. Human capital

b. Physical capital

c. Natural capital

d. None of the above

Q.2 Human capital increases
a. Labour in market

b. Labour Productivity

c. Trained labour

d. None of the above

Q.3 Innovation leads to
a. Growth

b. Development

c. production

d. All of the above

Answer Key
1-a, 2-b, 3-d

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