THE RELATIONSHIP BETWEEN CAPITAL DEVELOPMENT AND ECONOMIC GROWTH

The recent development in the growth theory (Romer, 1982) try to incorporate some of the development variables are human capital into the growth framework.

Thus the growth theorist stated acknowledge the importance of increased labour force participation improvement in education and inter-sector transfer of labour from agriculture, which was earlier part of development thinking.

Thus, there has been an increase tendency of convergence between growth economies and development economies. They have also attempt to empirically relate these two concept of economic growth and human capital development (Gustav Rants and Frances Stewart, 2001). This study focuses on the two-way relationship

between economic growth and human capital development as the central objective of human activity and economic growth potentially very important instrument for advancing it. At the same time, achievement in human capital development themselves can make a critical contribution of economic growth. There are thus two distinct causal chains examined, one runs from economic growth to human capital development as the resources from national income are allocated to activities contributing to human capital development, the offer run from human capital development to economic growth indicating how, in addition to being and end in it human capital development help to increase national income. This type of framework will act as an analytical base for the paper.
However, this paper will be examining only one chain, which run from human capital development via increased public expenditure on social sector activities, gross capital formation and enrolments into primary, post-primary and tertiary institution leads to longer economic growth. According to Ogujuba and Adeniyi (2003), the literature of endogenous growth theory has stimulated economists interest in the empirical evidence available from cross-country’s comparisons bearing on the main-level relationship between human capital formation and growth rate of real output. The growth models that via human capital as a simple inputs to production predict the growth rate of the economy.

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