Human Capital, Productivity, And Economic Growth Essays Examples

Human capital refers to the knowledge, skills, motivation, health and experience possessed by an individual or population. In the organizational framework, it refers to the collective value of intellectual capital( acquired skills, competencies, and knowledge), viewed as a significant factor for company's competitiveness. Human capital is a renewable source of innovation for the organization and is always owned by employees. As such, companies need to preserve the capital in tangible form by recording it or incorporating it into structures and procedures.
Of late, there is growing the emphasis on accumulation of human capital and it has been given a centre place in the models of economic growth. Human capital theory fetched economic benefits by investing in people. The theory assumes that education increases MPP( Marginal Physical Product) of workers.
Many economists have identified education as an emerging human capital, health and nutritional expenditure also form its significant aspects though(Becker, 1993). Education, as a human capital activity, enables the transmission of available knowledge and production of new knowledge. The new knowledge acts as a source of innovation and change that drives other factors of production.
A body of literature has found strong links between education, productivity, and output levels. There is a positive causal relation between investments in education and earning. It applies to both levels, individuals, and society. Researchers have identified two primary ways in which human capital contributes to productivity and growth.
Firstly, human capital directly participates in the production and its greater accumulation would mean growth of output levels. Published studies have highlighted a quantitative relationship between education and growth of per capita GDP. Secondly, it raises technical progress and facilitates innovation, creativity, and diffusion of advanced technology. An advanced technology is positively related to productivity and economic growth.
Corvers(1997) has argued that human capital increases labor productivity levels through worker's effect and productivity growth through research effects. A study conducted in Sub- Saharan Africa used Cob Douglas production function to analyze the impact of human capital on productivity. The study found that productivity was higher in those companies where average education level of employees was more than other organizations. Empirical evidences also reveal that training in the firms cranks up labor productivity than counterparts who do not undertake trainings.
There are two main approaches to studying the impact on labor productivity. First approach considers earnings as a proxy for productivity. The second method estimates the relation between different variables of human capital and labor productivity. It has been observed that education, health, skills, nutritional framework increase work competencies and productivity.
Succinctly, the impact of investing in human capital can be seen from two perspectives. The direct impact is on output growth, productivity, and GDP rate. Indirect effect can be considered as a better environment, less crime rates, better health and other such aspects. Though these are often considered as external benefits( usually non-economic), serious attempts are being made to quantify these impacts in economic terms. Skills, education, knowledge, health, competencies form the fundamental for better performance of individuals and act as drivers to accelerate individual productivity levels and economic growth.

References

Becker, G. (1993). Human Capital. Chicago: Chiacgo University Press.
Corvers, F. (1997). The Impact of Human Capital on Labor Productivity in Manufacturing Sectors. Applied Economics , 975-987.
Maria, J. F. (2001). Human Capital Accumulation and Economic Growth. Investigaciones Economicas , 585-602.
Sweetland, S. (1996). Human Capital Theory: Foundations of a Field of Inquiry. Review of Educational Research , 341-359.
Wilson, R. A., & Geoff, B. (2004). The Impact of Human Capital on Economic Growth: A Review. Luxembourg.