Testing the Effects of Human Capital Stock and Accumulation on Economic Growth in Nigeria

CHAPTER ONE
INTRODUCTION
1. Background of the Study Today’s world economies are ruled by knowledge economy, a kind of economy that offers more promise than the black gold economy. As the global economy shifts towards more knowledge based sectors, for example, the manufacture of ICT devices, pharmaceuticals, telecommunications and other ICT based sectors, R & D, skills and human capital development becomes a central issue for policy makers and practitioners engaged in economic development both at the national and regional level (OECD, 1996). The study of economic growth must start with the study of the people who produce it. They work with their own hands, design, build and operate the machines of production, and structure and run the institutions and markets that make growth possible. Julian Simon concluded that the size of the human population together with the technologies these people produce is the root cause of economic growth (Simon, 2000). He rightly argues that people are the carriers of knowledge, but then goes on to the more controversial assertion that since the discoveries of the past were produced by people, the rate of discoveries must have been influenced by human numbers In discussing the effect of human capital on economic growth, two approaches have been distinguished in the theoretical literature. The first strand of literature focuses on the stock of human capital as an explanation of cross-country growth differentials as suggested by Nelson and Phelps (1966). The second approach looks at human capital as an input factor in production function as in Lucas (1988) and points to the accumulation of human capital as the main factor driving growth differentials among countries. In recent years various attempts have been made by researchers to determine the effect of human capital on economic growth. Nelson and Phelps (1966) show that high level of human capital facilitates the adoption of new

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