Abstract:
This paper investigates the relationship between human capital and
economic growth in Pakistan with aggregate time series data. Estimated
with the Johansen (1991) approach, the fitted model indicates a critical
role for human capital in boosting the economy’s capacity to absorb world
technical progress. Much higher returns, including spillovers, to secondary
schooling in Pakistan than in OECD economies is consistent with very
substantial education under-investment in Pakistan. Similarly, extremely
large returns to health spending compare very favorably with industrial
investment. Human capital is estimated to have accounted for just under
one-fifth of the increase in Pakistan’s GDP per head. Since the 1990s, the
impact of deficient human capital policies is shown by the negative
contribution to economic growth.
