Trace the relationship between human capital and economic growth.
Trace the relationship between human capital and economic growth.
Human capital is positively related to economic growth though, it is difficult to establish a relationship of cause and effect from the growth of human capital to economic growth.
But we can see that human capital formation is related to economic growth in the following manner:
(i) Higher Productivity of Physical Capital: Human capital increases productivity of physical capital as specialised and skilled workers can handle machines or techniques better than the unskilled workers. This increased productivity and production leads to economic growth.
(ii) Innovative Skills: Human capital facilitates innovation of new methods and techniques of production and this increases the rate of economic growth in the form of an increase in GDP.
(iii) Higher Rate of Participation and Equality: Human capital formation leads to a higher employment rate. With an increase in employment, productivity rises. Also, an increase in employment opportunities increases the level of income and this helps in reducing inequalities of wealth.
(iv) Brings Positive Outlook: The process of human capital formation brings a positive outlook to the society which is different from orthodox and traditional ways of thinking, hence it increases the rate of participation in the workforce leading to an increase in the level of production and GDP.
Human capital is positively related to economic growth though, it is difficult to establish a relationship of cause and effect from the growth of human capital to economic growth.
But we can see that human capital formation is related to economic growth in the following manner:
(i) Higher Productivity of Physical Capital: Human capital increases productivity of physical capital as specialised and skilled workers can handle machines or techniques better than the unskilled workers. This increased productivity and production leads to economic growth.
(ii) Innovative Skills: Human capital facilitates innovation of new methods and techniques of production and this increases the rate of economic growth in the form of an increase in GDP.
(iii) Higher Rate of Participation and Equality: Human capital formation leads to a higher employment rate. With an increase in employment, productivity rises. Also, an increase in employment opportunities increases the level of income and this helps in reducing inequalities of wealth.
(iv) Brings Positive Outlook: The process of human capital formation brings a positive outlook to the society which is different from orthodox and traditional ways of thinking, hence it increases the rate of participation in the workforce leading to an increase in the level of production and GDP.
