Nexus Between Human Capital Expenditures and Economic Growth in Pakistan

Abstract

This study examines the relationship between Pakistan's economic growth and investments in human capital. It investigates how spending on human capital significantly affects economic expansion. The education and health sectors are two main areas where money is spent on human capital. Federal and provincial governments also track the total amount spent on the health and education sectors. At the federal level, GDP is a stand-in for economic growth, whereas per capita income is employed at the provincial level. The empirical association between the underlying variables has been estimated using time series data spanning 1985–2016. Both long-run and short-run coefficients have been calculated using the Autoregressive Distributed Lag (ARDL) and Error Correction models. The study's conclusions suggest that investing in human capital, particularly in health and education, raises GDP and per capita income because it boosts worker productivity. Furthermore, the results also showed that investing in human capital will strengthen Pakistan's economic expansion.