Human Capital

Human capital has been identified as a key stimulus of economic development. The theoretical models of economic growth have underscored the role of human capital. The empirical analysis of growth for a broad group of countries shows that the school attainment has positive effect on growth. It has been widely observed that increases in national output have been large compared with the increases of land, man-hours, and physical reproducible capital. Investment in human capital is probably the major explanation for this difference. As an economic concept human capital is at least two centuries old, but its incorporation into the mainstream of economic analysis and research is a new and lively development of the past two decades.The need for

Many theoretical models of economic growth, such as those of Nelson and Phelps (1966); Lucas (1988); Becker, Murphy, and Tamura (1990); Rebelo (1992); and Mulligan and Sala-i-Martin (1992), have emphasized the role of human capital in the form of educational attainment. Empirical studies of growth for a broad cross-section of countries, such as those by Romer (1990a), Barro (1991), Kyriacou (1991), and Benhabib and Spiegel(1992), have used proxies for human capital. These studies have, however, been hampered by the limited educational data that were available on a consistent basis for a large number of countries. The relationship between Human Capital and Economic Growth being established in the changing dynamics of the world is studied here. To unify an index applicable to all economies is the hypothesis for this literature

A country can improve its technology level by imitating from the frontier or by innovating new knowledge. An economy which is lagging far behind the world technology frontier can improve its technology level by allocating its labor force mainly into imitation. Similarly, an advanced economy can progress technologically by innovating new knowledge. There exists an optimal composition of skilled and unskilled human capital and by implementing that appropriate policy an economy can converge to the world technology frontier if the world technology frontier is not growing at a very faster rate. That is, an optimal education policy is crucial for both technologically developing and developed