Sally Fitzgibbons Foundation

Beginning the Academic Essay

ALLAMATIQBALTOPENTUNIVERSITY
TestingTtheTRelationshipTbetweenTHumanTcapitalTandTEconomicTGrowth:TaTStudyTofTPakistan
AuthorTname
MuhammadTAzeemTBhatti
ThesisTsubmittedTforTtheTdegreeTofTM.com
27TAugust,T2017
T
CHAPTERT1
INTRODUCTION
1.1TBackgroundTofTtheTstudy
SustainedTeconomicTgrowthTaccompaniedTwithTsocialTdevelopmentTisToneTofTtheTnotableTmacroeconomicTobjectivesTofTeveryTcountryTandTinTthisTregardThumanTcapitalTisTdeemedTasTanTessentialTingredient.

InTPakistan,TlargeTpartTofTpopulationTliesTbelowTtheTpovertyTline.TMostTofTtheTpolicyTmakersTargueTthatTbyTeconomicTgrowth,TweTcanTreduceTtheTpovertyTandTunemploymentTbutTinTPakistan,TsituationTisTnotTlikeTthis.TTheTmainTreasonTofTslowTeconomicTgrowthTinTPakistanTisTpoorTqualityTofTeducation,TlackTofTgoodThealthTfacilities,TeducatedTunemploymentTandTlackTofTskilledTmanpower.

InTPakistanTforTpovertyTelimination,TitTisTnecessaryTthatTgovernmentTallocateTmaximumTbudgetTonThumanTcapitalTformation,TbecauseTitTisTanTactiveTfactorTofTproduction.TManyTresearchersTusedTdifferentTproxiesTforTmeasuringTtheThumanTcapitalTformation.TTheTpresentTliteratureTexpressedThumanTcapitalTbyTeducationTandThealthTcomponents.TEducationTandThealthTareTmainTfactorsTofThumanTcapitalTformation,TbecauseTinTorderTincreaseTgrowthTrateTofTproductivityTandTpeopleTmustTbeTskilledTandTfreeTfromTdiseases.

DespiteTtheTsignificanceTofThealthTandTeducationTsectorTforTeconomicTgrowthTofTanyTeconomy;TtheseTareTmostTignoredTsectorsTinTPakistan.TForTboostingTupTtheseTsectorsTitTisTrequiredTtoTplanTpoliciesTandTprogramsTthatTadvantageTtheTpoorTpeople.THumanTcapitalTisTanTimportantTingredientTofTeconomicTgrowth.TByTincreasingTinvestmentTonThumanTcapitalTandTcreatingTmoreTdynamicTlaborTforce,TwillTgetsThigherTfutureTgrowthTandTincome.TIfTPakistanTgovernmentTspendsTmoreTonThealthTsocietyTandTindividualTgetTbenefitsTfromTinvestmentTonTandTeducationTsectors,TthisTwillTleadsTtoTimproveTtheTlivingTstandardTofTpoor.

1.2TProblemTStatement
InTPakistan,TlargeTpartTofTpopulationTliesTbelowTtheTpovertyTline.TMostTofTtheTpolicyTmakersTargueTthatTbyTeconomicTgrowth,TweTcanTreduceTtheTpovertyTandTunemploymentTbutTinTPakistan,TsituationTisTnotTlikeTthis.TTheTmainTreasonTofTslowTeconomicTgrowthTinTPakistanTisTpoorTqualityTofTeducation,TlackTofTgoodThealthTfacilities,TeducatedTunemploymentTandTlackTofTskilledTmanpower.

TheTpresentTliteratureTexpressedThumanTcapitalTbyTeducationTandThealthTcomponents.TEducationTandThealthTareTmainTfactorsTofThumanTcapitalTformation,TbecauseTinTorderTincreaseTgrowthTrateTofTproductivityTandTpeopleTmustTbeTskilledTandTfreeTfromTdiseases.

1.3TResearchTGap.

EducationTandThealthTisTgrowingTrapidlyTacrossTtheTworldTdueTtoTtheirTdistinctiveTcharectersticsTandTimportanceTinThumanTlifeTandTeconomiesTofTtheTcountries..TYouTneedTtoTincreaseTyourTinvestmentTinTEducationTandTHealthTsectorsTsoTyouTcanTincreaseTtheTlivingTstandardTofTtheTpeopleTandTearnTmoreTprofitTdueTtoTskilledTlaboureTwhoTworkedT78%TmoreTefficientlyTandTeffectively.

1.4TSignificanceTofTStudy
HealthTandTEducationTsectorTisTalwaysTimportantTandThisTimportanceTisTincreasingTrapidlyTdayTbyTdayTdueTtoThisTgreatTinfluenceTinTeconomyTofTanyTcountry.

ThereTareTfewTstudiesTavailableTinTimportanceTofTtheseTfactorsTbuttTtheseTstudiesTdidTnotTcoverTallTaspects.TInTthisTstudyTweTinsureTtoTcoverTallTimportantTaspectsTofTtheseTfactorsTtoTprovideTgoodTandTqualityTinformationTtoTgovernmentTthatTcanThelpThimTinTbetterTwayTtoTourTcameTtheTproblemsTofThealthTandTEducationTtoTboostTtheTcountryTeconomyTwithTefficiencyTandTeffectiveness.

1.5TResearchTQuestion
InTeconomyTofTPakistanTtheTimpactTofThumanTcapitalTandTeconomicTdevelopmentTfactorsTrelationship.

HowTtheseTfactorsTcontribute?
WhatTbenefitsTweTcanTenjoyTbecauseTofTtheseTfactors.

1.6TResearchTObjective
TheTmainTfocusTofTtheTstudyTisTtoTfindToutTtheTrelationshipTofTHumanTcapitalTandTEconomicTdevelopmentTinTtheTenvironmentTofTtheTPakistanTandThowTtheseTfactorsTcontributesTmoreTefficientlyTandTeffectivelyTinTtheTeconomiesTandTovercomeTunstructuredTproblemsTandTincreaseTtheTefficiency.

CHAPTERT2
LITERATURETREVIEW
THumanTCapitalTandTEconomicTDevelopmentTinTPakistan.

AccordingTtoTeconomicTtheoryThumanTcapitalToptimallyTcontributesTinTformationTofTnationalTincome.TDevelopmentTeconomistsTandTpolicyTmakersTacrossTtheTworldTnowTfocusTonTtheTwalfareTandTdevelopmentTofTcountriesTandTimproveTtheTqualityTofThumanTcapital.TAccordingTtoT(PopkinTetTal.T2012),ThumanTcapitalTisTmostlyTlinkedTwithTvariationsTinToutputTperTworker.TAsTSolowTsuggestedTthat,ToutputT(Y)TdependsTonTKnowledgeTofTtheTworkerT(A)TandTstockTofTcapitalT(K)
Y=F(K,AL)ALTdenotesTeffectiveTlaborTorTtechnologicalTprogressTwhileTtheTmodelTsummarizesTthatTmoreTknowledgeTwillTleadTtoTmoreTtechnologicalTprogressT(Rehman,T2012).TLiteratureTevidencedTthatTveryTfewTcountriesTreportedTeconomicTgrowthTwhileTfocusingTonTtheirTeducationTandThealthTsectors.TFindingsTevidencedTthatThigherTeducationTinTSouthTKoreaTisT98%,T94%TinTFinland,TandT60%TinTIsrael.TInTPakistanTitTisTaboutT7.8%,TwhereasTIndiaTenjoysT15%T(Oketch,T2006).THence,TtheTstudiesTreportedTthatThumanTcapitalTisTanTimportantTelementTofTgrowthTwhichTnotTonlyTdependsTonTeducationTandThealthTbutTalsoTonTtechnologicalTandTorganizationalTgrowth.

TrendsTinTPakistan’sTHDIT1980-2013

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Source:THumanTDevelopmentTReportT2013-Pakistan
InTPakistaniTcontext,TthereTareTmanyTstudiesTwhichTstudiedTtheTassociationTbetweenTGrossTDomesticTProductT(GDP)TgrowthTandTHumanTCapital.TResearchersTreportedTmixtureTofTinconsistencyTinTlastTsixtyTyearsTregardingTEconomicTandTsocialToutcomesTinTPakistan.TDueTtoTPoorTgovernanceTandTunstableTpoliticalTenvironmentTeconomicTgrowthThasTchangedTrespectively.TReportsTevidencedT1.7%TofTitsTGDPTspendingTonTchildrenTeducation.TWhileTonlyT0.22%TgoesTtoThigherTeducationT(Kulkarni,T2012).

AgainstTtheTdetailsTgivenTabove,TtheTspecificTobjectivesTofTtheTstudyTincludeTtoTdetermineTtheTeffectTofThumanTcapitalTonTeconomicTgrowthTforTPakistanTandTsuggestingTpolicyTimplicationsTforTitsTimprovement.

HumanTcapitalTisTveryTbroadTterm,TthereTareTmanyTfactorsTthroughTwhichTitTcanTbeTenhancedTorTimproved.TWhenTtheTcountryTisTonTitsTwayTtoTachieveThighTproductivityTandTeconomicTdevelopment,TitTmustTensureTtoTenhanceTtheTeffortsTtoTraiseTtheTstandardsTofTitsThumanTcapitalTandTphysicalTcapital.TRavnT(1993)TexaminedTlinkTbetweenTpublicTpolicyTandTeconomicTdevelopmentTforTinterdependentTeconomies.TTheTstudyTformulatedTaTmodelTonTtheTbasisTofTendogenousTgrowthTtheory,TwhichTstatesTthatThumanTcapitalTdependsTonTpublicTexpenditures.TFindingsTofTtheTstudyTsuggestedTthatTgrowthTandTwelfareTareTreallyThigherTunderTcooperationT;TcountriesTareTlinkedTthroughTcross-countryTspilloversTthatTincreaseThumanTcapital.TATsimilarTkindTofTstudyTbyT(Haq,T2008)TpresentedTtwo-countryTendogenousTmodelTwithTmixedTagents.TResultsTpointedToutTthatTbecauseTofTwageTdifferential,TgrowthTandTincomesTofTmigrationTanTeconomyTcanTachieveThumanTcapitalTdevelopment.TTheTresultsTalsoTshowedTthatTtheTperfectTlaborTmobility,Twages,Ttaxes,TandTsubsidiesTwillTresultsTinTentireTpopulationTofTcountryTwithTlowerTwageTandTmigrationTwithThigherTwage.

GregorioT(1996)TintroducedTtwoTenginesTofTgrowthTi.e.ThumanTcapitalTandTphysicalTcapital.TLater,TTempleT(1999)TcollectedTdataTfromT64TcountriesTandTevidencedTaTpositiveTrelationTbetweenToutputTandTeducationTlevelTafterTconductingTanTempiricalTanalysis.TRanisT(2000)TalsoTinvestigatedTcrossTcountryTanalysisTofTHumanTdevelopmentTinTtheTcontextTeconomicTgrowth.TTheTdataToverT1960TtoT1992TshowedTaTpositiveTandTsignificantTrelationTbetweenTpublicTexpendituresTandTinvestmentTrateTonThealthTandTeducation.

KalemliT(2000)TstudiedTenhancedTlifeTexpectationTinTrisingTlevelTofThumanTcapital.TTheTmajorTconclusionsTincludedTthatTlowerTmortalityTrateTleadsTtoTraiseTextentTtheTschoolingTwhichTisTeconomicallyTsignificant.TNoorbakhshT(2001)TcheckedTtheThypothesisTwhetherTtheTtotalTforeignTdirectTinvestmentT(FDI)TdirectedTtoTlimitedTcountriesThelpsTtoTincreaseTtheTqualityTofThumanTcapital.TItTconcludedTthatTFDIThelpsTtoTraiseTtheTskillsTandThumanTresourceTcapabilitiesTinTdevelopingTcountries.TAnotherTanalysisTbyTAgiomirgianakisT(2001)TstudiedTEconomicTgrowthTandTHumanTCapitalTdevelopmentTinTGreece.

EmpiricalTmodelTisTestimatedTbyTusingTSoytasTandTSariT(2003)Tco-integrationTmethodTandTGrangerTCausalityTTest.TDataTcompriseTofTperiodTfromT1960TtoT1994.TSignificantTresultsTwereTreportedTforTGDPTandTeducation.TResultsTsuggestTthatThigherTlevelTofTeconomicTdevelopmentTleadsTtoTincreaseTinTdemandTforThigherTeducation.TFurthermoreTstudyTalsoTsuggestedTthatTpolicyTmakersTinvestTfundsTinTeducationTsectorTthatTprovideTskills.TPradhaT(2012)TalsoTstudiedTgrowthTandThumanTcapital.TTheTanalysisTwasTdoneTinTthreeTgroupsTofTcountriesTi.eTadvancedTeconomies,TnewlyTdevelopedTeconomiesTandTlessTdevelopedTeconomiesTgTWeightedTLeastTSquareT(WLS)TtechniqueTwasTusedTtoTcalculateTtheTresults.TFindingsTdemonstratedTvariableTrelationshipTbetweenTgrowthTandTeducation.TKhodabakhshiT(2011)TinvestigatedTmeasuresTofThumanTcapitalTfromTaTbroadTpanelTofTcountries.TStudyTconsistsTofT108TcountriesTusingTtimeTseriesTdataTfromT1960TtoT2000.TEmpiricalTanalysisTisTconductedTbyTusingTGiniTCo-efficient.TFindingsTofTstudyTshowedTthatTmaximumTnumberTofTcountriesThaveTmanagedTtoTdecreaseThumanTcapitalTinequalityTandThenceTachievedTdevelopment.TResultsTshowedTthatThumanTcapitalTinequalityTnegativelyTimpactsTeconomicTgrowthTrate.TItTwasTconcludedTinTtheTstudyTthatTeducationTinequalityTisTrelatedTwithTlowerTinvestmentTrateTandTalsoTlowerTincomeTgrowth.TRecommendationsTincludeTthatTpoliciesTshouldTbeTconductedTtoTpromoteTlevelTofTgrowth,TeducationTandThumanTcapital.

SpagatT(2006)TdiscussedTtheTlinkTbetweenThumanTcapitalTdistributionTandTitsTlong-runTprospectsTinTtransitionTeconomies.TItTshowedTthat,TinTtransitionTeconomiesTeducationalTachievementsTareThighTasTcomparedTtoTperTcapitaTGDPTandThighTinvestmentTinTeducationTleadsTtoTminimizeTcorruptionTandTmaximizeTtheTforeignTinvestment.TParkT(2006)TinvestigatedTgrowthTimplicationTandTpopulationTdistributionTinTtermsTofTeducation.TStudyTisTbasedTonTpooledTdataTcompriseTofT94TdevelopedTandTdevelopingTcountriesToverT1960-1995.

OzcanT(2000)TinvestigatedTthatTroleTofThumanTcapitalTisTnecessaryTforTAfricanTregion.TStudyTtriedTtoTassessTtheTlinkTbetweenThumanTresourceTdevelopment,TinvestmentTinTphysicalTcapitalTandTgrowth.TConclusionTdrawnTincludeTthatTslowTgrowthTinTlaborTproductivityTisTdueTtoThighTinvestmentTinTphysicalTandThumanTcapitalTBaldacciT(2008)TinvestigatedTeffectsT(bothTdirectTandTindirect)TofTsocialTspendingTandTeconomicTpolicyTinterventionsTonTeconomicTgrowthTandThumanTcapital.TTheTdataTwasTcollectedTfromT118TdevelopingTcountriesTinTaTtimeTperiodT1975TtoT2000.TTheTresultsTevidencedTdirectTandTsignificantTeffectTofTspendingTonTeducationTandThumanTcapital.TReiterT(2011)TinvestigatedTassociationTbetweenTforeignTdirectTinvestmentT(FDI),TeconomicT;ThumanTdevelopment.TPanelTdataTwasTcollectedTfromT49TdevelopingTcountriesToverT1980-2005TandTPanelTlinearTregressionTwasTuseTtoTestimatesTtheTresult.TFindingsTreportedTpositiveTassociationTbetweenTstudyTvariables
AfzalT(2011)TstudiedTeducationTandTeconomicTgrowthTinTcontextTofTPakistanTfromT1990TtoT2009.TAutoregressiveTDistributedTLagT(ARDL)TandTGrangerTCausalityTApproachTwereTusedTforTestimation.TResultsTevidencedTthatThigherTeducationTcausesThigherTeconomicTgrowth.TFurthermoreTitTalsoTshowedTthatTlaborTforceTandTeducationTcontributeTsignificantlyTinTeconomicTgrowth.TMoreoverTgovernmentTmustTfocusTonTplanningTbetterTeducationTsystemTespeciallyThigherTeducationTsoTthatTcountryTwillTmoveTtowardTdevelopment.TAdoptTwaysTtoTpromoteTprimaryTeducationTbecauseTprimaryTeducationTisTservingTasTanToutputTforTallThigherTlevelsTofTeducation.

WhileTgoingTthroughTtheTliteratureTreview,TitTisTconcludedTthatTthereTisTsubstantialTamountTofTliteratureTthatTdiscussedTtheTroleTandTimportanceTofThumanTcapitalTforTenhancingTtheTeconomicTdevelopmentTandToverallTproductivityTofTaTcountry.TKeepingTinTmindTthisTfact,TcurrentTresearchTconductsTanTempiricalTanalysisTforTtheTcaseTofTPakistanTtoTstudyTtheTlinkTbetweenThumanTcapitalTandTeconomicTgrowth.

BenhabibTandTSpiegelT(1994)TinvestigatedTtheTimpactTofThumanTcapitalTonTeconomicTdevelopmentTofTdifferentTcountriesTandTstudiedTphysicalTandTHumanTcapitalTstocksTTheTdataTwasTcollectedTformTtheTcrossTcountryTandTwasTanalyzedTbyTgrowthTaccountingTregressionTandTusingTtheTCobbT-TDouglasTaggregateTproductionTfunction.TFindingsTofTtheTstudyTshowsTthatThumanTcapitalTisTinsignificantlyTrelatedTtoTeconomicTgrowth.TNumerousTstudiesThighlightedTdifferentTdeterminantsTofTinvestmentTandTeconomicTgrowth.TNoorbakhsh,TPanoliTetTal.T(2001)TstudiedTforeignTdirectTinvestmentT(FDI)TasTaTdeterminantTofThumanTcapitalTinTdevelopingTcountries.TResultsTevidencedTthatTforeignTdirectTinvestmentTisTaTsignificantTdeterminantTofThumanTcapitalTinTdevelopingTcountriesTfurtherTtheTresultsTwereTalsoTstatisticallyTsignificant.

FafchampsTandTQuisumbingT(1998)TalsoTinvestigatedTtheTimpactTofThumanTcapitalTonTtheTlaborTallocationTandTproductivity.TTheTsampleTofTtheTstudyTincludedTdifferentThouseholdTfromTtheTfourTdistrictsTofTPakistan.TTheTfindingsTreportedThighTincomeTofThouseholdsThavingTmoreTmaleTeducatedTfamilyTmembers.TFurtherTtheTstudyTevidencedTinsignificantTimpactTofTproductivityTonTtheTproductionTofTlivestockTandTcrops.TTheTresultsTalsoTshowedTthatTfemaleTeducationTdoTnotThaveTsignificantTimpactTonTtheTproductivityTandTlaborTallocationTofTtheThouseholdTinTPakistan
SomeTofTtheTstudiesTalsoTinvestigatedTtheTrelationshipTbetweenTeconomicTgrowthTandThumanTcapitalTinTPakistan.TJohansenT(1991)TapproachTwasTusedTtoTanalyzeTtheTdataTandTdeduceTresults.TTheTresultsTshowedTthatThumanTcapitalToutputTisTdirectlyTandTsignificantlyTrelatedTtoTforeignTtechnicalTsupportTfurtherTtheTstudiesTalsoTshowedTthatThigherTproductivityTofTsecondaryTschoolTinTPakistanTisTdependentTonTlowTlevelTofTtechnicalTsupportTandTlastlyTtheTresultsTalsoTsignifiesTthatThumanTcapitalTcontributeTminorTinTincreasingTGDPTperTheadT(AbbasT;Peck,2007)
FigureT2TbelowTgivesTaTbriefTsketchTofTtotalTschoolTenrollmentTinTPakistanTandTIndiaTwhileTsplittingTtheTtimeTperiodTintoTtwoThalves

T
FigureT2TTrendsTofTTotalTSchoolTEnrollmentsTofTPakistanTandTIndia,T1975-2013
Source:TDataThasTbeenTtakenTfromTWorldTDevelopmentTIndicatorT(WDI)
EducationalTsystemTofTPakistanTisTbasedTonTBritishTColonialTEducationalTSystemT(BCES).TWhenTPakistanTgotTindependence,TtheTcolonialTsystemTwasTlimited.TLater,TitTinvestedTlessTinTeducationTsectorTwhileTcomparatively;TIndiaTinvestedTmoreTinTeducationTsector.TInT1979TIndia’sTgrowthTrateTgoesTdownTandTitTaffectsTeducationTsector.TPakistan’sTeducationTorTschoolTenrollmentTrateTisTalmostTsameTduringT1975-1984.TInT1999-2000,T2.1%TofTGrossTNationalTProductT(GNP)TwasTspentTbyTgovernmentTofTPakistan.TFindingsTshowedTthatTwhenTcountry’sTpopulationTincreasesTatTannualTrateTofT2.4%TgovernmentTexpendituresTincreasesTbyT2.7%TofTGNP.TInT2001-2002,TtheTliteracyTrateTwasT50.5%.TIndia’sTschoolTenrollmentTrateTisTdecreasedTinT1998TandTthenTaTsharpTdecreaseTinT2004TisTshownTbecauseTofThighTfiscalTdeficits,TloansTformTIMF.TInTthisTperiodTIndiaTwasTonThighTeconomicTcrisis.TThisTwillTaffectTeducationTsectorTtoTaTgreatTextentTbecauseTofTlowTinvestmentTinTthisTsector.

HigherTlevelTofTeducationTaffectsTtheTlabor,TEfficiencyTandTtechnicalTadvancementTwhichTinTturnTincreaseTtheTspeedTofTeconomicTgrowth.TStudyThighlightedTlong-runTrelationshipTbetweenThumanTcapitalTformationTandTeconomicTgrowth.

ForTeffectiveTutilizationTofTotherTresources,TitTisTnecessaryTtoTimproveTtheTskillsTandTcapacityTofTpeopleTbyTeducationTandTprovisionTofThealthTfacilities.TInTthisTwayTPakistanTisTableTtoTreducedTunemploymentTandTimprovesTlevelTofTeconomicTgrowth.TTheTaimTofTstudyTisTtoTinvestigateTtheTrelationshipTbetweenTeconomicTgrowthTandThumanTcapitalTformationTinTPakistan.TGiveTpolicyTrecommendationTforTdevelopmentTandTsustainableTgrowthTofTPakistan.

TheTgovernmentTofTPakistanThasTfailedTtoTreapTtheTmaximumTbenefitsTfromThumanTcapitalTdueTtoTlessTemphasisTandTlessTbudgetTallocationTtoTsocialTsector.TDespiteTalmostTthreefoldTincreaseTinTtotalTexpenditureTofTpublicTsectorTsinceT2001,TtheTgovernmentTspendingTonThealthTandTeducationThasTremainedTlow.

InTfactTspendingTonThealthTasTaTpercentageTofTGDPThasTevenTdeclinedToverTtimeTasTitTwasT0.72%TofTGDPTinT2001TwhichTdeclinedTtoT0.54%TofTGDPTinTyearT2009.TInTtermsTofTeducationTspendingTPakistanTisToneTofTtheTlowestTinTtheTSouthTAsiaTandTinTtermsTofThumanTdevelopmentTindexTlatestTrankingTofT2010,TPakistanTrankedTatT125thTpositionTwhereasTIndiaTrankedTatT119thTposition,TMaldivesTrankedTatT107thTposition;TSriTLankaTrankedTatT91stTposition.TTheTtwoTotherTcountriesTofTtheTregion,Ti.e.TBangladeshTandTNepal,TareTconsideredTtoTbeTlowThumanTdevelopedTnationsTandTrankedTatT129thTandT138thTrespectively.

MostTofTtheTempiricalTresearchTconductedTonTtheTsubjectTmatterTonTPakistanTeconomyThasTdefinedThumanTcapitalTinTtermsTofTeducationTindicatorsTorTinTtermsTofThealthTindicators.TTheseTindicatorsTaloneTfailTtoTcaptureTdevelopmentTandTskillsTofTtheTlaborTforce;Ttherefore,TthereTisTaTneedTtoTconductTresearchTonTthisTaspectTthatTusesTmuchTbroaderTmeasureTofThumanTcapitalTinTtheTcontextTofTPakistanTeconomy.TTheTpresentTstudyTisTanTattemptTtoTuseTbroaderTmeasureTofThumanTcapitalTasTitTusesTeducationTindexTandThealthTindexTasTproxiesTforThumanTcapital.

DuringTtheTpastTcentury,TtheTfocusTofTresearchersTremainedTonTtheTimpactTofThumanTcapitalTonTeconomicTgrowthTbyTincreasingTtheTfacilitiesTofTeducationTandThealth.TATnumberTofTempiricalTstudiesThaveTdocumentedTaTstrongTandTpositiveTrelationshipTbetweenThumanTcapitalTandTeconomicTgrowth.THowever,TthisTrelationshipTbetweenTtheTvariablesTremainedTambiguous.

SchultzT(1971)TandTBeckerT(1962)TbothThaveTdevelopedTandTanalyzedTgrowthTmodelsTaugmentedTwithThumanTcapitalTandTfindTsignificantTpositiveTassociationTbetweenTeconomicTgrowthTandThumanTcapitalTformation.TAccordingTtoTPritchettT(1996),TempiricalTresultsTofTcrossTcountryTmacroTstudiesTareTcontroversialTandTinconsistentTwhereasTresultsTofTmicroTstudiesTareTconsistentTandTbothThaveTshownTpositiveTimpactTofTeducationTandThealthT(proxiesTforThuman
Capital)TonTindividual’sTproductivityTandTincome.TEarlierTcrossTcountryTmacroTstudiesTfindTsignificantTpositiveTimpactTofThumanTcapitalT(education)TonTeconomicTgrowth,TseeTforTexample,TBarro,T1991;TKyriacou,T1991.TWorldTBank’sTstudyT”EastTAsianTMiracle”TinT1993TalsoThighlightsTthatTgrowthTinThumanTcapitalThasTcausedTrapidTdevelopmentTofTEastTAsianTcountries.TRosenzweigT(1990)TpointsToutTthatTmajorTdeterminantTofThighTgrowthTofTdevelopedTcountriesTandTpoorTgrowthTofTunderTdevelopedTcountriesTisTdifferenceTinTtheThumanTcapitalTgrowth.TDevelopedTcountriesTareTcharacterizedTbyThighTstandardsTofTlivingTwhereasTdevelopingTcountriesTareTnot.

SachsTandTWarnerT(1997)TfindTquadraticTrelationshipTinThealth-growthTnexus.TTheyTassertTthatTimprovementTinThealthTstandardsTdoTimproveTeconomicTgrowth,Thowever,TwhenThumanTcapitalTincreases,TeconomicTgrowthTalsoTincreasesTbutTatTaTdecreasingTrate.TStewartTetTal.T(1998)TtryTtoTexploreThumanTdevelopmentTandTeconomicTgrowthTnexusTusingTcrossTcountryTstatisticsT(includingT35TtoT76TdevelopingTcountries)TduringT1970-92.TTheyTidentifyTtwoTchains,Ti.e.ToneTfromThumanTdevelopmentTtoTeconomicTgrowthTandTotherTfromTeconomicTgrowthTtoThumanTdevelopment.TAccordingTtoTthem,TthereTexistsTstrongTtwoTwayTcausationTinThumanTdevelopmentTversusTeconomicTgrowthTnexus;Thowever,TstrengthTofTtheTpositiveTrelationshipTrunningTfromTeconomicTgrowthTtoThumanTdevelopmentTdependsTonTfemaleTeducationTandTshareTofTpublicTexpenditureTinTsocialTservicesTwhereasTincomeTdistributionTandTinvestmentTrateTdetermineTtheTstrengthTofTpositiveTrelationshipTrunningTfromThumanTdevelopmentTtoTeconomicTgrowth.TAccordingTtoTFogelT(1994),TduringT1970sTandT1980sTapproximatelyToneTthirdTofTBritain’sTGDPTgrowthThaveTbeenTobservedTdueTtoTsubstantialTimprovementTinThealthTfacilities.

AccordingTtoTTaniguchiTandTWangT(2003),TeducationTandThealthTbothTcauseTeachTotherTandTthusTcontributeTinTeconomicTgrowth.TWeilT(2001)TfindingsTrelatedTtoThealth-growthTnexusTfurtherTstrengthenTtheTimportanceTofThealthTforTeconomicTgrowth.TTheTstudyTconcludesTthatT17-20%TofTvariationsTinTincomeTacrossTcountriesTisTdueTtoTdifferencesTinThealthTstatus.TAgiomirgianakisTetTal.T(2002)TconductTpanelTstudyT(consistingTofT93Tcountries)TonTsubjectTmatterTandTfindTsignificantTpositiveTlong-runTimpactTofTeducationT(primary,TsecondaryTandTtertiary)TonTeconomicTgrowth.TBloomTetTal.T(2004)TtryTtoTinvestigateTtheTimpactTofThumanTcapitalTonTeconomicTgrowth.TByTutilizing,T2SLSTapproachTtheyTfindTthatTschoolingTandTlifeTexpectancyTbothTpositivelyTcontributeTtoTeconomicTgrowth.TImprovementsTinThealthTStandardsTareTassociatedTwithTincreaseTinToutputTdueTtoTincreasedTlaborTproductivityTandTcapitalTaccumulation.TSeebensTandTWobstT(2003);TMoserTandTEliotT(2005)TbothThaveTassertedTthatTinTtheTlong-runTeducationT(humanTcapital)TincreasesTsubstantiallyThouseholdTincomeTasTwellTasTeconomicTgrowth.THowever,TotherTstudiesTincludingTBillsTandTKlenowT(2000),TEasterlyTandTLevineT(2001),TTempleT(2001),TBosworthTandTCollinsT(2003)ThaveTfailedTtoTestablishTpositiveTassociationTbetweenThumanTcapitalT(yearsTofTschooling)TandTeconomicTgrowth.TInTcaseTofTPakistan,TmostTofTtheTstudiesThaveTusedTmicroTdataTonThumanTcapital.TTheseTstudiesTconcludeTthatTeducationTbringsTsignificantTpositiveTreturnsTforTwageTearnersT(forTdetailsTseeTNasirTandTNazilT(2001);TBehrmanTetTal.T(2008)).TUsingTmacroTdataTinTaTcomparativeTanalysisTofTPakistanTandTIndia,TAbbasTandTQaiserT(2000)TfindToverallTSignificantTandTpositiveTimpactTofThumanTcapitalT(schoolTenrollmentTratesTasTaTproxy)TonTeconomicTgrowthTduringT1970-1994.TTheyTuseThigherTsecondary,TsecondaryTandTprimaryTenrolmentTratesTforTobservingTtheTroleTofTeducationTinTeconomicTgrowth.TTheyTemployTOLSTonTstandardTgrowthTmodelTaugmentedTwithTvariablesTofTenrolmentTrates.TTheTresultsTofTtheTstudyTrevealTthatTprimaryTenrolmentTrateThasTpositiveTandTsignificantTimpactTonTeconomicTgrowthTonlyTinTcaseTofTIndia.THumanTcapitalTmeasuredTbyTsecondaryTandThigherTsecondaryTenrolmentTratesThaveTpositiveTandTsignificantTimpactTonTeconomicTgrowthTinTPakistan.TTheTstudyTindicatesTthatTpositiveTandTsignificantTimpactTofThumanTcapitalTonTeconomicTgrowthTinTbothTcountriesTwhenTproductionTfunctionTaugmentedTwithTeffectiveTlaborTinputTisTusedTinTestimation.TKhanT(2005)TtriesTtoTanalyzeTtheTrelationshipTbetweenThumanTcapitalTandTeconomicTgrowthTinT72TdevelopingTcountriesTforTtheTperiodT1980-2002.TTheTstudyTconcludesTthatTcountriesTwhichTinvestedTsignificantlyTinThumanTcapitalThaveTachievedThigherTreturnsTinTtermsTofTeconomicTgrowth.

MalikT(2006)TusingTOLSTfailsTtoTfindTpositiveTassociationTbetweenThumanTcapitalTandTeconomicTgrowthTinTPakistanTandTwhenTheTusesT2SLSTestimationTtechniqueTtheTresultsTareTtotallyTopposite.TPeckTandTAbbasT(2008)TalsoTfindTpositiveTimpactTofTeducationTandThealthTonToutputTduringT1960-2003.TQadriTandTWaheedT(2011)TinvestigateTtheTimpactTofThumanTcapitalTonTPakistan’sTeconomicTgrowthTduringT1978-2007TandTfindTitTaThighlyTsignificantTdeterminantTofTeconomicTgrowth.TTheyTutilizeThealthTadjustedTeducationTindicatorTasTaTproxyTforThumanTcapitalTinTCobb-DouglasTproductionTfunctionTratherTdefiningThumanTcapitalTsolelyTinTtermsTofThealthTorTeducation.TKhatakTandTKhanT(2012)TuseTanalyticalTtechniques,Ti.e.TOLSTandTJohansenTcoTintegrationTtoTinvestigateTtheTimpactTofThumanTcapitalTinTeconomicTgrowthTofTPakistanTforTtheTperiodT1971-2008.TTheTresultsTsupportTsignificantTpositiveTassociation
BetweenTsecondaryTeducationTandTeconomicTgrowth.

AfterTreviewingTempiricalTliteratureTonTtheTsubjectTmatterTitTisTevidentTthatTinTcaseTofTcrossTcountryTstudiesTempiricalTresultsTremainedTinconclusiveTwhereasTinTaTsingleTcountryTanalysisTmostlyTstudiesTsupportTpositiveTassociationTbetweenThumanTcapitalTandTeconomicTgrowth.THowever,TitTisTobservedTthatTdifferentTstudiesThaveTusedTdifferentTproxiesTforThumanTcapitalTandTdifferenceTinTmeasurementTofThumanTcapitalTmayTbeTaTsourceTofTbiasTinTtheirTempirical
results.TFurthermore,TitTcanTbeTconcludedTthatTearlierTstudiesThaveTusedTeducationTasTaTproxyTforThumanTcapitalTandTmoreTrecentTstudiesTlayTemphasisTonTbothThealthTandTeducationTasTaTproxyTforThumanTcapital.TTheTexistingTliteratureTonTPakistanTeconomyTshowsTthatTappropriateTproxiesTofThumanTcapitalTareTnotTusedTalongTwithTrecentTadvancesTinTdynamicTmodeling.TThereTexistsTaTgapTinTtheTliteratureTregardingTtheTroleTofThumanTcapitalTonTeconomicTgrowthTin
Pakistan.TTheTpresentTstudyTisTanTattemptTtoTbridgeTthisTgapTbyTanalyzingTtheTcausalTrelationshipTbetweenThumanTcapitalTandTeconomicTgrowthTusingTrecentTadvancesTinTdynamicTmodelingTandTmoreTappropriateTproxiesTforThumanTcapital.TTheTresultsTofTthisTstudyTmayTbeThelpfulTforTpolicyTmakersTinTdesigningTappropriateTpoliciesTgivingTpriorityTtoTtheTdevelopmentTofThumanTcapital.

2.2TEDUCATIONTINTPAKISTAN
EducationTencompassesTbothTtheTteachingTandTlearningTofTknowledge,TproperTconduct,TandTtechnicalTcompetency.TItTthusTfocusesTonTtheTcultivationTofTskills,TtradesTorTprofessions,TasTwellTasTmental,TmoralTandTaestheticTdevelopment.THistoricalTbackgroundTWhenTPakistanTgainedTindependenceTinT1947,TWestTPakistanThadTonlyToneTinstitutionTofThigherTeducation,TtheTUniversityTofTtheTPunjab;TEastTPakistanThadTtheTUniversityTofTDhaka.TOverTtheTnextT20Tyears,TmanyTprivateTandTpublicTschoolsTandThigherTeducationTinstitutionsTwereTestablishedTtoThelpTfuelTtheTcountry’sTsocio-economicTdevelopment.TInTtheTearlyT1970’sTallTofTPakistan’sTeducationalTinstitutionsTwereTnationalizedTgovernmentTofTZulfikarTAliTBhutto,TwhoTwasTcommittedTtoTtheTideaTofTIslamicTSocialism.TForTtheTnextTdecade,TPakistan’sTentireTsystemTofTeducationTwasTstate-Trun.THowever,TtheTgrowingTdemandTforThigherTeducationTfastToutpacedTtheTestablishmentTofTnewTpublicTuniversities.TDuringTthatTperiod,TtheTsystemTcouldTaccommodateTonlyT25TpercentTofTthe
HighTschoolTgraduatesTwhoTappliedTtoThigherTeducationTinstitutions.TTheToverTcrowdingTPromptedTmanyTwealthyTPakistanisTtoTseekTuniversityTdegreesTabroadTinTtheTUnitedTStates,TGreatTBritainTandTAustralia,TwhileTothersTsoughtToutTprivateTtutorsTatThomeTorTenteredTtheTjobTmarketTwithoutTaTdegree.TInT1979TaTgovernmentTcommissionTreviewedTtheTconsequencesTofTnationalizationTandTconcludedTthatTinTviewTofTtheTpoorTparticipationTratesTatTallTlevelsTofTeducation,TtheTpublicTsectorTcouldTnoTlongerTbeTtheTcountry’sTsoleTproviderTofTeducation.TByTtheTmid-1980s,TprivateTeducationalTinstitutionsTwereTallowedTtoToperateTonTtheTconditionTthatTtheyTcomplyTwithTgovernment-TrecognizedTstandards.TUntilT1991,TthereTwereTonlyTtwoTrecognizedTprivateTuniversitiesTinTPakistan:TAgaTKhanTUniversityTestablishedTinT1983;TandTLahoreTUniversityTofTManagementTSciencesTestablishedTinT1985.TByT1997,Thowever,TthereTwereT10TprivateTuniversitiesTandTinT2001-2002,TthisTnumberThadTdoubledTtoT20.TInT2003-2004TPakistanThadTaTtotalTofT53TprivateTdegreeTgrantingTinstitutions.TTheTrapidTexpansionTofTprivateThigherTeducationTisTevenTmoreTremarkableTifTweTlookTatTtheTnumberTofTinstitutionsTestablishedTonTaTyear-by-yearTbasis.TInT1997,TforTinstance,TthreeTprivateTinstitutionsTwereTestablished;TinT2001TelevenTnewTprivateTinstitutionsTwereTopened;TandTinT2002TaTtotalTofT29TprivateTsectorTinstitutionsTsprungTup.TTheTgovernmentThasTdecidedTtoTintroduceT’EnglishTMediumTEducation’TonTaTphasedTbasisTandTtoTsubstantiallyTendTtheTrightTtoT’MotherTTongueTEducation’.TThisTnewTpolicyTwhichTisTtermedT’EducationTSectorTReformsT(PolicyTdecisions)’,TstatesTthatT”EnglishTlanguageThasTbeenTmadeTcompulsoryTfromTClass-1Tonwards.”TandTtheT”IntroductionTofTEnglishTasTmediumTofTinstructionTforTScience,TMathematics,TComputerTScienceTandTotherTselectedTsubjectsTlikeTEconomicsTand
GeographyTinTallTschoolsTinTaTgraduatedTmanner.

2.3TRoleTofTTechnologyTinTEducationTforTEnhancingTEconomicTGrowthTinTPakistan.

TechnologyThasTfoundTitsTwayTintoTeveryTaspectTofTourTcultureTtoday.TIt’sTinTmedicine,Tit’sTinTsocialTwork,TandTnoTevenTmoreTthanTitTuseTtoTbe,Tit’sTinTourTeducationTsystems1.TTeachersTareTcontinuallyTbeingTencouragedTtoTtakeTtechnologyTclassesTsoTthatTtheirTstudentsTcanTbenefitTfromTtheirTknowledge.TInTEducation,TtechnologyTplaysTareTroleTinTtheTclassroom,TinTassistiveTtechnologyTproducts,TandTsoftwareTthatTisTbroughtTintoTtheTschool.TSoTwhatTexactlyTisTtheTrole
ofTtechnologyTinTeducation?TTechnologyTisTmakingTitTpossibleTforTteachersTtoTreachTmoreTstudents,TallowingTstudentsTtheTtimeTtheyTneedTtoTsucceed,TandTprovidingTourTfutureTworkforceTwithTcompetent,TknowledgeableTemployees.TItTisTsoTtrueTthatTtechnologyTisTembeddedTinTourTculture,TandTthatTweTareTimmersedTandTdependentTonTit,TasTwell.TTechnologyTchangesTsoTrapidlyTandThasTsuchTaTpervasiveTimpactTthatTitTisTactuallyTdeterminingTourTculture.TChildrenTandTadolescentsTareTprimeTusersTandTbeneficiaries.TAdmininistratorsTandTeducatorsTneedTtoTkeepTpaceTwithTlifeToutsideTtheTclassroomTinTorderTtoTintegrateTandTaccessTtheTwonderfulTlearningTopportunitiesTtheTInternet,TiPods,TcellTphones,Tpodcasting,TandTevenTsocialTnetworkingTsitesTandTvideoTgameTplayToffer.TToday’sTyouthTspendThalfTtheirTleisureTtimeTinTfrontTofTscreensT-TitTisTaThugeTpartTofTtheirTlife.TTeachingTinTaTdydactic/lectureTformatTnoTlongerTworks,TandTitTisTnotTutlizingTtheTpowerTofTtechnologicalTadvances.TTeachersTneedTtoTinviteTstudentsTtoTlearnTbyTusingTwhatTtheyTknowTbest-technologyTgadgets.

2.4TTheTlongTtermTimpactTofThealthTonTeconomicTgrowthTinTPakistan.

HumanTcapitalTplaysTpivotalTroleTforTsustainableTeconomicTGrowth.TAsTdifferentTgrowth,TtheoriesTsuggestTtheTroleTofThumanTcapitalTasTaTsignificantTforTgrowthTprocess.TTheTconceptTofThumanTcapitalTinTeconomicTliteratureTdefinedTbroadlyTbyTincludingTeducation,Thealth,Ttraining,Tmigration,TandTotherTinvestmentsTthatTenhanceTanTindividual’sTproductivity.THowever,TtheTgrowthTeconomistsTthatThaveTincorporatedThumanTcapitalTinTtheTgrowthTstudies;TpaidTgreaterTattentionTonTanalysingTtheTimpactTofTeducationTonTeconomicTgrowth,TwhileTignoringTtheTroleTofThealthThumanTcapital.TItTisTonlyTinTveryTrecentTtimesTthatTstudiesThaveTstartedTlookingTatThealthTandTtriedTtoTestimateTtheTrelationshipTbetweenThealthTstatusTandTeconomicTgrowth.TThereTexistsTaTtwo-wayTrelationshipTbetweenTimprovedThealthTandTeconomicTgrowth.

HealthTandTotherTformsTofThumanTandTphysicalTcapitalTincreasesTtheTperTcapitaTGDPTbyTincreasingTproductivityTofTexistingTresourcesTcoupledTwithTresourceTaccumulationTandTtechnicalTchange.TFurthermore,TsomeTpartTofTthisTincreasedTincomeTisTspentTonTinvestmentTinThumanTcapital,TwhichTresultsTinTfurtherTperTcapitaTgrowth.TAccordingTtoTFogelT(1994),TapproximatelyToneTthirdTofTGDPTofTBritainTbetweenT1790TandT1980TisTtheToutcomeTofTimprovementsTinThealthTespeciallyTimprovementTinTnutrition,TpublicThealth,TandTmedicalTcareTfacilitiesTandTtheseTimprovedThealthTfacilitiesTshouldTbeTconsideredTasTlabourTenhancingTtechnicalTchange.TOnTtheTotherThand,TEconomicTdevelopmentTresultsTinTimprovedTnutrition,TbetterTsanitation,TinnovationsTinTmedicalTtechnologies;TallTthisTincreasesTtheTlifeTexpectancy,TreducesTtheTinfantTmortalityTrate.TWorldTDevelopmentTreportT2007TdepictsTtheTsituationTisTbyTconcludingTthatTAverageTlifeTexpectancyTatTbirthTworldwideTroseTfromT51TyearsTtoT65TinTlessTthanT40Tyears.TSimilarlyTAverageTlifeTexpectancyTinTdevelopingTcountriesTwasTonlyT40TyearsTinT1950TbutThadTincreasedTtoT63TyearsTbyT1990T(WorldTBankT1993).TPrestonT(1976)ThasTanalysedTvariousTdeterminantsTofTlifeTexpectancyTandTemphasizedTthatTeconomicTdevelopmentTisTtheTmostTimportantTfactor.TPurposeTofTthisTpaperTisTtoTanalyseTtheTlong-termTrelationshipTbetweenThealthTandTperTcapitaTGDP,TbyTusingTCointegrationTandTGrangerTCausality.TLong-termTanalysisTofThealthTandTeconomicTgrowthTwouldTbeTveryThelpfulTinTdeterminingTtheTpossibleTmagnitudesTofTfullyTaccumulatedTeffectsTofThealthTonTeconomicTgrowth.

TheTorganizationTofTtheTpaperTisTasTfollows:
someTofTtheTpreviousTstudiesTconductedTonTtheTsubjectTofTtheTrelationshipTbetweenTeconomicTgrowthTandThealthTstatus.TSectionT3TdescribesTtheTstatusTofThumanTcapitalTsituationTinTPakistan.InTSectionT4TEconometricTModelTandTdataTusedTinTtheTstudyTwasTdiscussedTwhichTmakeTtheTAnalyticalTFrameworkTofTtheTpaper.TSectionT5TdiscusesTtheTresultsTandTmainTfindingsTofTtheTanalysisTandTinTsectionT6TtheTconclusionTemergesTfromTtheTstudyTareThighlighted.TLiteratureTReview:TAsTmentionedTinTintroductionTthatTnumerousTstudiesTwereTconductedTonTtheTrelationshipTbetweenThumanTcapitalTdevelopmentTandTeconomicTgrowth.TTheTmainTconclusionTofTtheseTstudiesTisTthatTthereTexistsTaTpositiveTrelationshipTbetweenThumanTcapitalTandTeconomicTgrowth.1TItTisTonlyTlastTdecadeTthatTthereTisTaTflurryTofTstudiesTexploringTtheTrelationshipTbetweenThealthTandTeconomicTgrowth.TByTusingTtheTadultTsurvivalTrateTasTanTindicatorTofThealthTstatus,TBhargavaTetTalT(2001)TfindsTpositiveTrelationshipTbetweenTadultTsurvivalTrateTandTeconomicTgrowth.TResultsTremainsTsimilarTwhenTadultTsurvivalTrateTisTreplacedTbyTlifeTexpectancy.

However,TfertilityTrateThaveTaTnegativeTrelationshipTwithTeconomicTgrowth.TBecause,TlifeTexpectancyTisTextremelyTinfluencedTbyTtheTchildTmortality.TGrowthTinTworkforceTisTmostlyTlowerTthanTpopulationTgrowth.TResultantlyThighTfertilityTrateTreduceTtheTeconomicTgrowthTbyTputtingTextraTburdenTonTscareTresources.TMayerT(2001)TalsoTusesTtheTprobabilityTofTadultTsurvivalTbyTgenderTandTageTgroupTasTaTmeasureTofThealthTstatus.TByTusingTGranger-type,TcausalityTtestTstudyTconcludesTthatThealthTstatusTcausesTeconomicTgrowthTinTLatinTAmericaTgenerally,TandTspecificallyTinTBrazilTandTMexico.TImprovementsTinTadultThealthTareTassociatedTwithT0.8–1.5%TincreaseTinTannualTincome.TMoreover,TtheTgrowthTimpactTisThigherTforTimprovementsTinThealthTofTfemaleTcomparedTwithThealthTofTmale.TBloomTetTalT(2004)TbyTusingT2SLSTtechniqueTfindsTthatTlifeTexpectancyTandTschoolingThaveTaTpositiveTandTsignificantTeffectTonTGDP.TImprovementsTinThealthTincreaseTtheToutputTnotTonlyTthroughTlabourTproductivity,TbutTalsoTthroughTtheTCapitalTaccumulation.TStudyTalsoTfindsTthatTimprovementTofToneTyearTinTaTpopulation’sTlifeTexpectancyTresultedTintoTanTincreaseTofT4%TinToutput.TByTusingTtheTaverageTheightTadultTsurvivalTrateTandTlifeTexpectancyTasTanTindicatorTofThealthTstatusTWeilT(2001)TfindsTthatThealthTisTanTimportantTdeterminantTofTincomeTvariationsTinTdifferentTcountries.TApproximatelyT17-20T%TofTtheTcross-countryTvariationTinTincomeTcanTbeTexplainedTbyTcross-countryTdifferencesTinTstatusTofThealth.TArora(2001)TusesTtheTlifeTexpectancyTatTbirth,TatTagesTfive,Tten,Tfifteen,TorTtwenty,TandTstructureTofTadulthoodTasThealthTindicatorsTforT10TindustrialTcountries.TStudyTconcludesTthatTimprovementTinThealthTstatusThasTincreasedTtheTpaceTofTlong-termTeconomicTgrowthTbyT30-40T%.TItTalsoTconcludesTthatThighTrateTofTdiseaseTprevalenceTandTdeathsTareTamongTtheTmainTreasonsTforTpoorTlong-termTgrowthTinTdevelopingTcountries.TLorentzenTetTalT(2005)TanalysisTtheTimpactsTofTadultTmortalityTrateTonTeconomicTgrowth.TStudyTfindsTthatThighTmortalityTrateTreduceTtheTeconomicTgrowthTbyTcurtailingTtheTtimeThorizon.TResultantlyTpeopleTtakeTactionsTthatTyieldTshort-termTbenefitsTatTtheTlong-termTcost.TStudyTalsoTconcludesTthatTfertility,TinvestmentTinTphysicalTandThumanTCapital,TareTtheTchannelsTbTadultTmortalityTrateTaffectsTeconomicTgrowth.TMeasuringThealthTstatusTbyThealthTstatusTbyTinfantTmortalityTrate,TlifeTexpectancyTrateTandTcrudeThealthTrateTandTperTcapitaTGNITasTindicatorTofTeconomicTgrowth;TMalikT(2006)TfindsTthatTifTOLSTisTusedTthenTthereTisTnoTsignificantTrelationshipTbetweenThealthTstatusTandTeconomicTgrowth.THowever,TwhenT2SLSTisTusedTthenTstudyTfindsThighlyTsignificantTeffectTofThealthTindicatorsTonTeconomicTgrowth.

HypothesisTthatT”HumanTcapitalTisTpositivelyTandTsignificantlyTrelatedTtoTeconomicTgrowth.”
TwoTmainThypothesesTwouldTbeTtested;
HypothesisTthatT’healthTaffectsTeconomicTgrowth’TisTaTlongTrunTphenomenonTwouldTbeTtested.

T2-TWhether,TthereTexistsTaTtwo-wayTcausalityTorTcausalityTisTunidirectionalTbetweenThealthTandTperTcapitaTGDP.

CHAPTERT3.

DataTSource/TDescriptionTofTVariables
AnnualTtimeTseriesTdata-setTfromT1975TtoT2013ThasTbeenTutilizedTtoTconductTpresentTanalysis.TDataTisTcollectedTfromTEconomicTSurveyTofTPakistan,TInternationalTFinancialTStatisticsT(IFS),TGovernmentTFinancialTStatisticsT(GFS),TandTWorldTDevelopmentTIndicatorsT(WDI).TDependentTvariableTinTtheTstudyTisTgrowthTrateTofTrealTGDPT(LYt).TWhereasTexplanatoryTvariablesTinclude::
EducationTExpendituresT(LEDEXP):TEducationTexpendituresTareTtakenTasTaTshareTofTGDP.

HealthTExpendituresT(LHEXP):THealthTexpendituresTareTtakenTasTaTshareTofTGDPT(Haq,T2008).

GrossTFixedTCapitalTFormationT(LSI):T(LSI)TisTtakenTasTanTindicatorTofTshareTofTinvestmentTinTGDPT(Sial.2010)
MortalityTRateT(LMR):TItTisTtakenTasTaTshareTofTtotalTpopulationT(Ozcan,T2000).

SecondaryTSchoolTEnrollmentTRateT(SENR)
TheTlinkTbetweenTshareTofTinvestmentTinTGDPT(LSI),TsecondaryTschoolTenrollmentT(SENR),TtotalTeducationTexpendituresT(LEDEXP),TtotalThealthTexpendituresT(LHEXP),TandTmortalityTrateT(LMR)ThasTbeenTexaminedTbyTvariousTresearchersTinTtheTliteratureTincludingTTebaldiT(2012)T&TWaheedT(2011).TTheTfunctionalTformTofTmodelTcanTbeTexpressedTas:
LYt=f(LSIt,LEDEXPt,LHEXPt,LMRt,LSENRt)TestableTFormTofTtheTModelTis:
lnYt=?0+?1lnSIt+?2lnEDEXPt+?3lnHEXPt+?4lnMRt+?6lnSENRt+utForTempiricalTanalysis,Tfirstly,TAugmentedTDickeyTFullerT(ADF)TtestTwasTappliedTtoTidentify
thatTwhetherTseriesTareTstationaryTorTnon-stationary.TFindingsTshowedTthatTAutoregressiveTDistributedTLagT(ARDL)TapproachTisTsuitableTforTestimatingTelasticitiesTofTtheTmodel.

WhenTvariablesTareTofTdifferentTorderTofTintegrationTARDLTmethodTisTappliedTandTitTtakesTenoughTnumberTofTlagsTtoTcaptureTdataTgeneratingTprocedureTinTaTgeneralTtoTspecificTmodelingTframeworkT(Laurenceson,T2003).TThisTapproachTwasTdevelopedTbyT(Pesaran,T1998).TARDLTapproachThelpsTtoTavoidTproblemTofTnon-stationaryTtimeTseriesTdata.TItThasTfollowingTadvantages,TitTinvestigatesTtheTrelationshipTbetweenTsmallTsampleTsize,TitTdoTnotTrequiresTsameTorderTofTallTvariables,TitTavoidsTpre-testingTofTstationaryTissuesTandTcanTalsoTbeTusedTtoTtransformTError-CorrectionTModelTfromTSimpleTlinearTfromTit.TTheTARDLTrepresentationTofTtheTmodelTisTgivenTbelow:
?lnLY=T?0T+i=1??i?lnLSIt-1+i=1??i?lnLEDEXPt-1+i=1??i?lnLHEXPt-1T+Ti=1??i?lnLMRt-1+Ti=1??i?lnLSENRt-1+T?1lnLSIt-1+T?2lnLEDEXPt-1+T?3lnLHEXPt-1+T?4lnLMRt-1+T?5lnLSENRt-1+T?tHere,T’ln’TshowsTnaturalTlogarithmToperator.T”TisTusedTasTfirstTdifferencesToperator.T?0TisTinterceptTofTmodelTandT?,T?,T?,T?,T?TareTcoefficientsTofTshortTrunTvariablesTwhereas,T?1T,T?2T,T?3T,T?4TandT?5TareTtheTcoefficientsTofTlongTrunTimpactTofTvariablesTatTtheTfirstTdifferencesTvariablesTandT?tTisTerrorTterm.

CHAPTERT4.

4.1TEmpiricalTestimationTresultsTofTunitTrootsTtest
TheTAugmentedTDickeyTFullerT(ADF)TunitTrootTtestTisTusedTtoTcheckTtheTorderTofTintegrationTofTallTvariables.TTheTbelowTtableT5.1TshowsTthatTorderTofTintegrationTisTdifferentTthereforeTthisTstudyTappliedTAutoTRegressiveTDistributedTLagTtechnique.

TableT1.TUnitTRootTTestTResultTforTPakistan
Variables Level 1STTDifference OrderTof
Integration
LY -1.939446
(-3.536601) -5.803001**
(-2.945842) I(1)
LSI -3.310777
(-3.540328) -3.007069**
(-1.950394)
I(1)
LSENR -0.242637
(-2.941145)
-5.126497**
(-1.950117)
I(1)
LHEXP -0.810189
(-1.949856) -5.300313**
(-1.950394)
I(1)
LEDEXP -2.429129
(-3.540328)
-4.003207**
(-1.950687)
I(1)
LMR -3.811472
(-3.544284)
-0.778091
(-2.948404)
I(0)
Note:T**TshowsTsignificanceTatT5%TlevelTofTsignificance
TheseTresultsTofTtheTunitTrootTshowsTthatTgrowthTrateT(LYt),TshareTofTinvestmentT(LSI),TschoolTenrollmentTrateT(LSENR),THealthTexpendituresT(LHEXP),TEducationTExpendituresT(LEDEXP),TareTstationaryTatT1stTdifferenceTandTnon-stationaryTatTlevelTwhileTMortalityTrateT(LMR)TisTstationaryTatTLevel.

4.2TResultsTofTBoundsTTest
TheTcurrentTstudyTchoosesTtwoTasToptimalTlagTlengthTforTtheTvariableTsunderTstudy.TStudyTfindsTthatTaTco-integrationTexistsTbetweenT(LY),TlnT(SI),TlnT(EDEXP),TlnT(HEXP),TlnT(LSENR)TandT(LRM).TTheTresultTofTF-statsTforTbothTcountriesTisTgivenTinTbelowTtable.

Pakistan
F-statistics Probability
4.892513 0.0074
ResultTofTBoundTTestTofTCo-integration
TableT3.TResultsTofTAutoTRegressiveTDistributedTLagT(ARDL)
ShortTRunTElasticities
Variables coefficient Std.error t-statistics Prob.

C 7.978489 3.780582 2.110387 0.0454
D(LSI) 0.279853*** 0.049691 5.631898 0.0000
D(LMR) 0.632867 3.014940 0.209910 0.8355
D(LHEXP) 0.120075*** 0.025662 4.679140 0.0001
D(LEDEXP) -0.135792** 0.053079 -2.558321 0.1734
D(LSENR) -0.030996 0.023232 -1.0334190 0.0194
Note:T*TshowsTsignificanceTatT1%,T**TatT5%,TandT***TatT10%TlevelTofTsignificance
T-statisticsThighlightsTsignificantTandTnon-significantTrelationshipTwhileTtheTPositiveTandTnegativeTsignTshowsTtheTdirectionTofTrelationshipTbetweenTtheTstudyTvariables.TTheTresultTshowedTthatTGrossTFixedTCapitalTFormation,TusedTasTaTproxyTforTshareTofTinvestmentTinTgrossTdomesticTproductT(LSI)TshowsTaTsignificantTrelationTwithTgrowthTrateT(LY)TinTshortTrun.TStudyTofT(Malik,T2001)TalsoTshowsTpositiveTasTwellTasTsignificantTrelationTofTshareTofTinvestmentTwithTgrowthTrate.THealthTexpendituresT(HEXP)TshowTsignificantTbutTnegativeTeffectTonTgrowthTrate.

HaqT(2008)TalsoTshowsTsuchTresult.THe,TinThisTstudyTshowedTthat,ThealthTinputsTlikeThealthTexpendituresThaveTnoTsignificantTrelationTwithTeconomicTgrowth.TEducationTExpendituresT(LqqEDEXP)TshowsTsignificantTbutTnegativeTrelationTwithTeconomicTgrowthTinTshortTrun.TValeechaT(2012)TalsoTshowsTnegativeTeffectTofTeducationTexpendituresTinTshortTrun.TMortalityTRateT(LMR)TshowsTpositiveTbutTinsignificantTrelationTwithTgrowthTinTshortTrun.TKhodabakhshiT(2011)TshowedTlowerTimpactTofTlifeTexpectancyTonTHumanTdevelopmentTindexTirrespectiveTofTanTincreaseTinTit.

TableT4:TShortTRunTdiagnosticTtestsTforTPakistan.

R-squared 0.780923 S.D.TdependentTvar 0.041258
AdjustedTR-squared 0.680513 Durbin-WatsonTstat 2.362263
F-statistics 7.777339 Prob(F-statistics) 0.000015
TheTaboveTtableTshowsTthatT78%TvariationTinTgrossTdomesticTproductT(LYt)TisTexplainedTbyTexplanatoryTvariablesTlikeTLSI,TLEDEXP,TLHEXP,TLSENRTandTLMR.TF-statisticsTisT7.7;TthisTshowsTthatToverallTmodelTisTsignificant.TTheTvalueTofTDurbin-WatsonTstatTisT2.3.TThisTvalueTofTD-WTstatTshowsTthat,TthereTisTnoTproblemTofTautocorrelation.

4.3TNormalizedTEquationT(LongrunTEstimationTofTtheTModel)
ToTfindTtheTlongTrunTequation,TthisTstudyTnormalizedTtheTcoefficientTLYT(-1)TforTbothTcountries.TTheTnormalizedTequationTforTPakistanTisTgivenTbelow,
LYT(-1)T=T-0.525TLSIT–T0.762TLEDEXP**T+T0.065TLHEXPT+T6.438TLMR**T+T0.09TLSENR
Note:T**TSignificantTatT5%
FigureT3.TPlotTofTCumulativeTSumTofTSquare
lefttop
TheTstraightTlinesTrepresentTcriticalTboundsTatT5%TsignificanceTlevel.TItTconfirmsTtheTstabilityTofTtheTcoefficientsTandTcorrectsTspecificationTofTmodel.

CHAPTERT5
5.1TConclusionsTandTfindings.

InTthisTresearchTstudy,TweTinvestigatedTtheTroleTofThumanTcapitalTinTeconomicTgrowthTinTtheTcontextTofTPakistan.TTheTstudyTconsistsTofTtimeTperiodT1975TtoT2017s.TTheTfindingsTreportedTsignificantTroleTofThumanTcapitalTinTeconomicTgrowthTofTPakistan.TThereTareTsomeTdifferencesTamongTdifferentTregionsTonTbasisTofTsocial,Tcultural,TeconomicTandTpoliticalTfactors.TFindingsTshowedTthatTextendedTchangesTinThealthTandTeducationThaveTaTpotentialTtoTcreateTsomeTseriousTproblemsTinTPakistan.TInTPakistanTnegligibleTamountTofTGDPTisTspentTonTeducationTi.e.TlessTthanT2%T.ThereTmustTbeTwaysTtoTimproveTeducationTasTwellTasThealthTsoTthatTmaximumTnumberTofTparticipantsTinvolveTinThumanTcapitalTwhichTwillTfurtherTleadsTtoThigherTeconomicTgrowth.

5.2TRecommendation.

TheTstudyTprovidesTfollowingTpolicyTimplications:
ThereTisTaTneedTtoTimproveTeducationTsectorTespeciallyTinTtheTareasTwhereTbasicTfacilitiesTofTeducationTareTnotTavailable.TIfTtheThumanTcapital,TthroughTeducationTincreases,TitTwouldTsignificantlyTincreaseTeconomicTgrowth.THumanTcapitalTinTtheTformTofTlaborTandThumansTeffectsTeconomicTgrowthTpositivelyThenceTsomeTsolidTstepsTmustTbeTtakenTbyTtheTgovernmentTinTorderTtoTinvestmentTinThumanTcapitalTdevelopmentTinTtheTformTofTlaunchingTtrainingTprogramsTforTemployees.TSignificantTamountTofTfundsTmustTbeTallocatedTtoTeducationTsector.TGovernmentTshouldTprovideTbasicTnecessitiesTofTlifeTandTmadeTpoliciesTtoTreduceTpoverty.TProvideTemploymentTopportunitiesTtoTyoungTandTfreshTgraduates.

5.3TDiscussion.

TheTprimaryTpurposeTofTthisTstudyTwasTtoTexamineTtheTrelationshipTbetweenThumanTcapitalTandTeconomicTgrowthTofTcountry.TEarlierTresearchTsuggestTthatTthroughTeducationTandThealthTyouTcanTincreaseTyourTeconomicTgrowthTtheseTtowTareTbasicTfactorsTofThumanTcapital.

OurTresultsTshowsToverallTsignificantTeffectTofThumanTcapitalTonTeconomicTgrowthTofTcountry.TTheTresultsTclearlyTindicatesTthatTinTPakistanTlessTthanT2%TofTGDPTisTinvestingTinThealth,TlabourTandTeducationTsectorTwhichTcauseTaTmajorTproblemsTinTcountry.TWeTmustTinvestTorTfindTwayTtoTimproveTourTinvestmentTinTtheseTsectorsTtoTenhanceTtheTcapitalTgrowthTandTincreaseTtheTprofitabilityTofTtheTcountry.

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