Role of Human Capital in Economic Development

Concept of Human Capital Every nation needs to have its human capital to be developed to generate employment and contribute for socio-economic transformation. Many countries adopt human capital development as a special strategy to empower their people.

The importance of human capital is not only a new phenomena but it had been realized the importance in the ancient days as well. A Chinese proverb says To plan one year, saw seed; to plan ten years, plant trees; and to plan 100 years, develop human resources . Development of human capital is not only a short term strategy, but it should be looked from the long term perspective. The definition human capital used by Peter Husz is: "By human capital we mean the time, experience, knowledge and abilities of an individual household or a generation, which can be used in the production process". It is application of knowledge. It gives people an awareness of the rules and procedures to guide their behavior. It attempts to improve their performance. It is also concerned with preparing employees to work effectively and efficiently. In general it helps to develop specific type skilled persons in required number; fulfill the demand of skilled human resources; support industrial expansion; strengthen economic growth; increase enthusiasm in working condition; develop desired attitude of the people; and enhance entrepreneurial abilities, etc.

Role of Education and Health in Economic Development

Increased productivity is an indicator of economic growth and this can be achieved through
greater investment in labor and capital. However, investment in capital can only be fully utilized if there is a healthy and educated workforce available in the economy. Thus, health and

education both play a vital role in improving productivity and economic growth. For their dual role are both inputs and outputs they have a central role in economic development.

Good health not only gives a longer life period but also it helps in raising return to investments in education, as a healthy educated persons work adds to the productivity of the economy. Education will also raise awareness about basic sanitation and hygiene and lower the chances of an individual getting ill.

In 1950, some 280 of every 1000 children in the developing world as a whole died before their fifth birthday. By 2005, that number had fallen to 114 per 1000 in low income countries, and 37 per 1000 in middle-income countries (compared with 7 per 1000, in high-income countries).

Education is the driver of economic growth, and thus health plays an indirect role. The indirect effect of health is positive and significant. Without recognition of the indirect role of health the economic benefits of health improvements can t be possible. On the other side education is widely accepted as a leading instrument for promoting economic growth. For Africa, where growth is essential and if the continent is to move out of poverty, education is particularly important.

Recent evidence suggests higher education is both a result and a determinant of income and can produce public and private benefits. Higher education may create greater tax revenue, increase savings, investment and lead to a more entrepreneurial and civic society. It can also improve a nation s health, contribute to reduced population growth, improve technology, and strengthen governance. Again higher education will not make a difference in Africa if other barriers to development play a negative role. Higher education creates the potential, but governments and private actors must hold of the opportunities.

The role of human capital is almost universally regarded as the engine of economic growth. Sustained growth depends on levels of human capital whose stocks increase as a result of better education, higher levels of health and new learning and training procedures. Without a labor force with the minimum levels of education and health, a country would not be capable of maintaining a state of continuous growth. The effects of human capital variables mean that the investment rate tends to increase as the levels of education and health rise. Both these variables develop systematically according to levels of development, and these changes may be linked to increases in the investment rate. A more highly educated and healthier workforce finds it easier to create, use, and adapt new technologies. Poor countries have lower levels of human capital and therefore have greater difficulties in competing with those that are more highly developed. In order to generate growth in poorer economies their levels of human capital must begin to converge with those of richer nations.

Health and nutrition are also important elements of human capital. A healthier worker can contribute more in the production process than his unhealthy counterpart. There are several channels that define the contribution of health in production and output4. Like a healthier worker can produce more output than an unhealthy worker because of his higher physical and mental capabilities, vigor and stamina. In the same way, for a given level of all other factors, the economy can produce higher output if it has higher level of healthy workers. Health is an important factor for determining the level of returns from education because a healthier person can learn more than an unhealthy one from a given level of education. In this way, improvement in health increases output due to increased strength and also due to more learning from a given level of education.

Good health is an essential component of well-being. However, improvements in health status may be justified on purely economic grounds. It seems to be a logical assumption that good health raises human capital levels and therefore the economic productivity of individuals and a country`s economic growth rate. Better health increases workforce productivity by reducing incapacity, weakness, and reduces the opportunities an individual has of obtaining better paid

work. Further, good health helps to improved levels of education by increasing levels of schooling and academic performance.

Nutrition has a strong link with productivity, output and economic growth. A person who takes nutritious food is likely to be more productive due to high energy and strength. In this way providing good nutrition is considered as an investment in human capital. Especially in the case of economic growth, education and health reinforce each other; being healthy is as important for economic growth as being educated.

The government needs to consider all of these aspects of economic development. This in turn will also benefit the corporate sector of the economy and for this reason they should also help the government in improving the health and education for the country.

Human Capital Development for Women Empowerment

The last decade the traditional views of women have been changed quite remarkably and
women contribute to a larger extent to Bangladesh economy. It is conceivable that the share of rural women in total employed population in Bangladesh rose from 9 percent to 13 percent since the late 1980s. Clearly it indicates that rural women have been involving themselves in market based economic activities like garments sector at a pace that is growing much faster than that of men. Various non-governmental organizations like Bangladesh Rural Advance Committee (BRAC), CARE are now working in Bangladesh focusing on the empowerment on women. As the government has adopted inclusive policies to enroll in the civil service and other sector, the share of women has been dramatically increased. In early 1980s the number of women s share in bureaucracy, and other sector was less than 10% which rose to around 20% at present. However, they are still fare behind than male population.

From different writings it has also been found that positive changes have taken in their attitudes and perception of their own role after the getting them involved in different entrepreneurial activities. In other words participation in different entrepreneurial activities has empowered women in social, economic and cultural fields. Now the power and access in taking decision of their own has increased in economic and household matters for women in third world countries like Bangladesh. They are now much more self confident than before. Women are much organized as they have learned about different rights.

Total Literacy Rate and Life Expectancy at Birth to Explain Economic Development

Healthy human capital is one of the important factors in explaining the economic development.
There are many variables to represent human capital and health conditions of the people of a nation. We focus some of the literacy rate

To evaluate literacy rate, I consider some Asian countries. In the 1960s when most of these countries were at similar stages of economic development but now East Asian developing countries were far ahead of both Asian least developed countries and South Asian developing countries. In fact, the total literacy rates for East Asian developing countries in the 1960s were as high as 71 per cent for the Republic of Korea, 68 per cent for Thailand and even Malaysia had a rate of over 50 per cent. On the other hand, in case of all Asian least developed countries and South Asian developing countries, the total literacy rates were as low as only 9 per cent for Nepal and 15 per cent for Pakistan with Cambodia having a rate of 38 per cent. After three decades the total literacy rates are still far below 50 per cent particularly, in case of Bangladesh, Nepal and Pakistan as shown in figure. During the same period the East Asian developing countries have more or less achieved the formidable task of educating most of their people. As a result, in the late 1990s, the total literacy rate of the Republic of Korea has reached 98 per cent and Malaysia managed to achieve a rate of about 90 per cent.

Analyzing the health variable measured in terms of life expectancy at birth across the three groups of countries in the Asian region, like the literacy rate, again a similar sort of pattern is evident among these countries. For instance, in the 1960s, all Asian least developed countries and South Asian developing countries had a life expectancy at birth below 45 years with Bhutan and Nepal having a number of even much less than 40 years as shown in figure. On the other hand, during the same period, the East Asian developing countries had a life expectancy at birth well over 50 years with the Republic of Korea having a figure over 54 years followed by 53 years for Malaysia and 51 years for Thailand. In the late 1990s, although the Asian least developed countries and South Asian developing countries enhanced their life expectancy to a level of over 60 years at least in the case of Bangladesh, Bhutan, India and Pakistan, nevertheless, East

Asian developing countries is far more affecting as shown in the figure. Both Malaysia and the Republic of Korea, the life expectancy rate is now in the order of over 72 years with Thailand reaching a figure of 69 years.

From those data it can summarize that in the past three decades, the three groups of Asian countries considered a similar state of economic development but now there is a marked difference among them on account of their per capita incomes. The East Asian developing countries are now well beyond the reach of Asian least developed countries as well as South Asian developing countries in terms of economic development. Secondly, although in terms of per capita income all these groups of countries were quite comparable in the 1960s but in the context of human capital and health sector development, there were huge differences among them. East Asian developing countries far ahead of both Asian least developed countries as well as South Asian developing countries. In the 1990s, most East Asian developing countries

population were literate while Asian least developed countries and South Asian developing countries still have a long way to go. Thirdly, it is evident that the reason of East Asian developing countries rapid economic progress was their reasonably well developed and healthy human capital endowment which started to take momentum in the 1960s or even earlier.

It is noted that human capital generates economic development a nation needs to have a minimum captious mass of at least 70 per cent or more literate population. What this means is that if an overwhelmingly large number of people in a country are literate this may open up the minds of the masses, possibly make them more enlightened workers and perhaps institute some element of discipline in them. This literature can be even with simple basic education as being able to read newspapers. Through mass literacy, better prepared healthy workers and friendly government policies, East Asian developing countries seem to have been able to furnish those essential elements of rapid growth at the very early stages of their development.

References Health, Human Capital and Economic Growth by Oded Galor; Edited by Fernando Montenegro

Education Priorities for Human Resource Centered Development in Bangladesh by Manzoor Ahmed, Institute of Educational Development, BRAC University, Dhaka, Bangladesh; and James H. Williams, International Education, The George Washington University, Washington DC, USA

Human Capital and Economic Growth by Hyun H. Son

Strategy for Improving Human Capital in Bangladesh and Nepal: Does it help for Women Empowerment by Prof. Dr. T.N. Dhakal, Central Department of Public Administration,

Tribhuban University Kathmandu Nepal; and Ms. F. Nawaz, Department of Public Administration Rajshahi University, Bangladesh Human Capital and Economic Growth: TIME SERIES EVIDENCE FROM PAKISTAN by Faisal Sultan Qadri, University of Karachi

Human Capital and Economic Development by Simon Appleton and Francis Teal Economic Development by Michael P. Todaro and Stephen C. Smith