Is Human Capital Formation Amplifying Economic Development? Evidence from Pakistan

Abstract

Human capital dramas a very prominent part in expanding economic growth and ultimately in development of a country. The aim of this research is to investigate the long-term relation amid education enrolment and growth of the economy in Pakistan. Time series statistics has been used for the period of 1974 to 2010 for investigation. ARDL methodology, ADF and PP unit root tests have been bringing into play for estimations and to analyse the stationarity properties of all the variables used in this research. Taking the secondary school enrolment ration as a proxy of education, it was found the positive association amid human assets establishment and growth in the economy of Pakistan during the above mentioned period. Owing to one percent modification in education, growth in the economy will increase by 0.26 percent in the elongated period. Additional variables of unemployment rate, population rate and indirect taxes are likewise decidedly momentous in the long-term. Worth of ECM IS 0.47, shows 47 percent rapidity of modification. As a policy suggestion it is recommended to increase the student’s enrolment at educational institutions, especially at secondary education level, if pace of economic development has to increase in our country.