Abstract:
The study's primary goal was to look into the impact of human capital on the economic
growth of Ethiopia from 1980 to 2020. To explore the long run and short-run impact of
human capital on economic growth, ARDL Approach to co-integration and error
correction model was used. The Bounds test results reveal that real GDP, health
expenditure and gross capital formation have long-run connection. The finding shows
significant positive impact of human capital on economic growth by confirming direct
positive relationship between economic growth and measures of human capital (gross
capital formation and health). The estimated long-run model reveals that health
expenditure is the most significant contributor to real GDP growth, followed by gross
capital formation. In the short-run, the finding reveals that primary school enrolment is
the main contributor to real GDP change followed by gross capital formation and
education expenditure. Health has no significant short-run impact on the economy. But
its one-period lag has a significant and positive impact on the economy. The findings
mentioned above have significant policy implications. This study suggests that increasing
the ratio of gross capital formation to GDP and increasing primary school enrollment
can significantly boost economic performance. Such improvements have a significant
impact on human productivity, resulting in increased national output. By developing the
infrastructure of educational and health institutions that produce quality human
resources, the government should endeavor to establish institutional capacity that
increases school enrollment and improves primary human health. In addition, the
government should maintain its leadership role in establishing an enabling climate that
encourages private sector investment in human capital (education and health).
