Human capital on economic growth (Article) - Group E

Group E

Human capital consists of the knowledge, skills, and health that people invest in and accumulate throughout their lives, enabling them to realize their potential as productive members of society. Human capital accumulation is one of the key determinants of economic growth, for both developing and advanced countries. Human capital allows an economy to grow. When human capital increases in areas such as science, education, and management, it leads to increases in innovation, social well-being, equality, increased productivity, improved rates of participation, all of which contribute to economic growth.

Role of human capital on economic growth

i) Inventions, innovations, and technological improvement

Human capital leads to more innovations in the areas of production and other related activities. Innovation leads to more growth. Human capital also creates the ability to absorb new technologies.

(ii) Higher productivity of physical capital

Human capital increases labour productivity. So trained workers will use the physical capital more efficiently.

(iii) Raises production

The formation of human capital raises production levels and leads to economic growth by adding to the GDP. The knowledgeable and skilled workers can make better use of resources at their disposal.

(iv) High rate of participation and equality

By improving the productive measures of the labour force, the formation of human capital increases excellent employment. This leads to a high rate of participation in the labour force and reduces the gap between the poor and the rich.

(v) Improves the quality of life

Quality of life is indicated by income and health. Income and health depend upon the level of education, skill formation, etc. The formation of human capital increases better quality of population means more economic growth.