The Impact of Human Capital Development on Economic Growth in Ethiopia. Vector Autoregressive Approach

Master's Thesis from the year 2022 in the subject Economics - International Economic Relations, grade: 3.78, , language: English, abstract: The main objective of this study is to investigate the short run and the long run impact of human capital development on economic growth in Ethiopia over the period 1975-2020. The human capital development proxies are education and health expenditures to ratio of GDP, labor force participation and secondary education enrollment ratio, while real GDP per capita is a proxy variable of economic growth. The study applied Johnson Maximum Likelihood co-integration test and error correction mechanism to identify the impact of human capital development on Economic growth both in the long run and short run. The finding reveal that human capital development proxies (secondary education enrollment rate and public health spending to share of GDP) and labor force exhibit negative and significant effect on economic growth in the long run, while government expenditure on education exhibits positive and significant effect on economic growth in the long run. Hence, education spending is the main contributor of real GDP per capita in the long run. However, health spending did not contribute to human capital development and economic growth in the long run.