Impact Of Human Capital Development On Economic Growth: Evidence From Pakistan

Abstract

This study attempts to explain how the GDP growth rate of a developing nation is influenced between 2001 and 2020 by factors like healthcare expenditure, enrollment or vocational training, and the literacy rate of the population. The overall purpose of the study is to identify these socio-economic determinants and their impact on economic growth using a multiple linear regression model. Some indicators of human capital development and their relation to the GDP growth rate were among the data generated from international and national statistical agencies employed in the analysis. By using the results we conclude that all 3 variables are significant and the best indicator is the literacy rate then healthcare spending and the last indicator was enrollment in vocational training. For instance, the change in the healthcare spending and the rise in literacy rate and participation in vocational training lead to an increase of 0. 68%, 0.28%, and 0. 281%. Equivalent increase in GDP growth rates as high as 45%. It also shows the relevance of these variables in economic development as it accounts for roughly 76%. 3% of the variation of the GDP growth rate. It implies that policies aimed at increasing the access and quality of health care services; increasing access to and quality of education; or improving career preparation for work can all have a positive and positive effect on economic growth. The paper ends with suggestions for further research that will explore the relation among extra socioeconomic factors and success in the economy of different countries and regions. This study contributes to understanding how the human resource development influences the degree of economic growth in developing countries.

Background: The economic history of Pakistan is marked by both prosperous and difficult times. Improving Pakistan's human capital—the driving force behind its long-term economic prosperity—is no easy feat for a developing nation like Pakistan. The health, education, and abilities of the workforce are all components of human capital, which has a significant impact on productivity and creativity. On the other hand, human capital development indicators show that Pakistan's economy is struggling due to a significant disparity (Malik et al., 2020).

In the last few years, Pakistan has faced the problem of poor education infrastructure. Based on the Pakistan Economic Survey 2021-22, the literacy rate is close to 62. 3%, where there are great differences between urban and rural regions, and between male and female. The standard of education is another problem, for instance, many educational institutions are deficient in the fundamental facilities and have untrained teachers. The Global Competitiveness Report 2020 made it clear that Pakistan was 125^th among 141 countries in ranking the quality of primary education, which implies that the country has to do a lot of reforms (Wang et al., 2023). The skills of the workforce In Pakistan’s labor market are not in line with the labor market demands. The majority of graduates are not in a position to meet the industry’s demands, which results in a high unemployment rate among the educated youth. According to the Pakistan Bureau of Statistics (PBS), an unemployment rate of 6 has been reported. 5% in 2020, and the rate of the unemployment among the youngsters is more than 11%. The gap in career skills is partly caused by the obsolete curriculum and the inadequate vocational training programs that do not provide students with the skills that the market demands (Usman et al., 2023).

The health system and health results In Pakistan have a great influence on the human capital development. The World Bank data from 2021 points out that Pakistan’s healthcare expenditure is nearly 2. 8% of GDP, is, in fact, the lowest among the developing countries. This underinvestment has catastrophic health consequences, such as a high newborn death rate and a poor life expectancy. According to Pata and Ertugrul (2023), Pakistan was rated 154th out of 189 nations in the 2020 Human Development Index (HDI) due to its low levels of health, education, and income.

These difficulties have formed a unified whole that has hampered Pakistan’s chances of making the most out of its human resources for economic expansion. The problems that need to be solved by the measures are the education reform, the rising unemployment, and the health care difficulties. These problems can be dealt with by the policies that are made in order to improve the education, to match the skills of the workforce and the unemployment, and to the access of the health care. By enhancing human capital, Pakistan will be able to form a more productive and creative workforce, thus, the country will be able to achieve inclusive economic growth and the poverty will be reduced. The understanding of the complex links between human capital development and economic growth is the basic for the formation of the strategies that would guarantee the sustainable development for Pakistan (Chien et al., 2022).