The impact of human capital development on economic growth in South Africa

Abstract

Human development index as the measure of human capital development has always attracted interest of economists, researchers and policy makers. Government across the globe, South Africa in particular is also trying to improve the human capital by pumping more investments on, such as education and health. But the issue whether improved level human capital result in economic growth is still divisive. This paper uses HDI (human development index) as the proxy for human capital and GDP (Gross Domestic Product) as proxy for economic growth. The johanson co-integration test theoretical and OLS. The study further uses Granger Causality methods to determine the causal relationship between HDI and Economic Growth for the period 1980-2011. The findings indicate that in the long run HDI is subject to responsive movements as a result of changes in its proxies and fundamentals and that being the reason for government’s inducements. Consequently, the changes in the human capital reciprocate positively to the growth of the economy.