Determinants of human capital development in Ethiopian economy: Theory and empirical evidence | Intellect Skip to content
1981
Volume 21, Issue 2
  • ISSN: 1474-2748
  • E-ISSN: 2040-0551

Abstract

In line with the basic tenets of human capital development theory, the present study examines and presents the determinants of human capital development (Human Development Index [HDI]) in Ethiopia using time-series data from 1980/81 to 2019/20. Based on the Augmented Dickey–Fuller and Phillips–Perron unit root test results, the Autoregressive Distributed Lag (ARDL) bounds co-integration and error correction models are employed. The bounds test indicated the existence of significant long-run equilibrium relationship between HDI and its human capital input indicators. Results of the estimated long-run selected model indicated that public recurrent expenditure on education and health as well as its capital education expenditures and basic health coverage have a positive and significant contribution in improving the HDI of the country. On the contrary, government development expenditure on health, population–physician, student–school and age dependency ratios has an adverse effect on human capital development of Ethiopia. On the other hand, the short-run error correction model showed that a temporary disequilibrium level of HDI in the previous period is corrected by approximately 79.37 per cent in the current period to restore to a long-run equilibrium. Thus, a concerted effort is needed to expand and use public expenditure on education and health in an economic, accountable and transparent way. Furthermore, the turnover level of qualified teachers and medical doctors has to be reduced in addition to building and upgrading adequate quality education and health infrastructures and facilities in the economy.

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2022-06-01
2024-04-23
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