The impact of human capital on economic growth in Sri Lanka

Abstract

Introduction :

Human capital is the knowledge, skills and competencies embodied in individuals that facilitate the creation of personal, social and economic wellbeing (OECD, 1999). With the development of endogenous growth theory around 1980s, human capital was recognized as an important factor in the production function. [Y = Af (K, H L), ]. According to Romer (1986) and Lucas (1988) technology has no role in long run economic growth. It always depends on endogenous factors like human capital. This is demonstrated by the above growth equation.

Several empirical studies represent the impact of human capital on economic growth and demonstrate positive and significant long run impact. According to Halder and Mallik (2010), human capital has a significant effect on economic growth in India. However, Kassa (2006) has found a negative impact of human capital on economic growth. While human capital consists of both investments on health and education, Pleigt (2011) identify only higher education promotes growth in England.When compared with other developing nations, Sri Lanka has very impressive human development indicators. However, the investigation of the impact of human capital on economic growth in Sri Lanka has not received much attention. This paper attempts to fill this gap by empirically testing the impact of human capital on economic growth in Sri Lanka.