LITERATURE REVIEW: IMPACT OF HUMAN CAPITAL DEVELOPMENT ON ECONOMIC GROWTH



CHAPTER TWO
LITERATURE REVIEW
2.1       Theoretical Literature 
            The economic prosperity and functioning of a nation depends on its physical and human capital stock. Whereas the former has traditionally been the enhancement of human skills and talents are increasingly figuring in the research of social and behavioral sciences. In general terms, human capital represents the investment people make in themselves that enhance their economic productivity. The theoretical framework, most responsible for the wholesome adoption of education and development polices has come to be known as human capital theory. Based upon the work of Schultz (1971), Sakamota and Powers (1995), Psacharopoulos and Woodhall (1997), human capital theory rests on the assumption that formal education is highly instrumental and even necessary to improve production capacity of a population.

            In short, the human capital theorists argue that “an educated population is a productive population.” Human capital theory emphasizes how education increases the productivity and efficiency of workers by increasing the level of cognitive stock of economically productive human capability which is product of innate abilities and investment in human beings. The provision of formal education is seen as a productive investment in human capital, which the proponents of the theory have considered equally or even more equally worthwhile than that of physical capital.
            According to Babalola (2003), the rationality being investment in human capital is based on three arguments:
i.          That the new generation must be given the appropriate parts of the knowledge which has already been accumulated by previous generation.
ii.         That new generation should be taught how existing knowledge should be used to develop new products, to introduce new processes and production methods and social services. 
iii.       That people must be encouraged to develop entirely new ideas, products, processes and methods through creative approaches.
           
            According to Fagerlind and Saha, (1997) human capital theory provides a basic justification for legal public expenditure on education both in developing and developed nations. The theory was consistent with ideologies of democracy and liberal progression found in most western societies. Its appeal was based upon the presumed economic return of investment on education both at the micro and macro levels. Efforts to promote investment in human capital were seen to result in rapid economic growth for society. For individuals, such investment was seen to provide returns in the form of individual economic success and achievement. 

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            Most economists agreed that it is human resources of nation, not its capital nor its material resources that ultimately determine the character and pace of its economic and social development. Psacharopoulos and Woodhall (1997) assert that; human resources constitute the ultimate basis of wealth of nations.
            Capital and natural resources are passive factors of production, human beings are the active agencies who accumulate capital, exploit natural resources, build social, economic, and political organization, and carry forward national development. The main issues analyzed are whether higher levels of education or greater improvements in education are associated with faster output growth. Overall, the cross country evidence is mixed on both counts (withstanding the emphasis on human capital in new growth theories and recent neoclassical growth theories). In any case, a significantly positive correlation between education and output growth does not implies that education affects growth. Instead, both education and output could be driven by an omitted variable, total factors productivity growth for example. Bills and Klenow, (2000).
            One way to progress in our understanding of the effects of human capital on growth is to focus on channels through which such effects could work. It is often argued that high levels of human capital facilitate technology adoption (e.g. Nelson and Phelps, 1996; Barro, 1991 Benhabib and Spiegel, 1994, 2002; Acemoglu, 2003a; Caselli and Coleman, 2005). There is a consensus that new technologies becoming available since the 1970’s tended to be more skilled labour augmenting that the technologies of the 1950’s and 1960’s (e.g Autor, Katz, and krueger, 1998; Berman, Bound, Machin, 1998; Berman and Machin, 2000; (Aselli and Coleman, 2007). The defining characteristic of increase the productive efficiency of skilled relative to unskilled workers. Skilled labour augmenting technologies therefore result in faster total factor productivity (TFP) growth in human capital intensive industries (e.g. Kalm and Linn, 1998; Klenow, 1998). As a result, countries adopting new technologies quickly should experience fast output growth in human – capital intensive industries should be faster in economics with high levels of human capital. We therefore test whether countries with higher education levels experienced faster growth in more compared to less schooling-intensive industries in the 1980’s. theories of international specialization point to human capital accumulation as another important determinant growth in human capital intensive industries (e.g Ventura, 1997, 2005, Romalis 2004). Hence, we also examine the link between improvements in education and growth in education-intensive industries.
            One of these studies incorporates the contributions of human capital to income growth. It was the late1980’s and early 1990’s, that economists began to place greater emphasis on human capital as determinant of productivity and growth. Yet most economists argued that it is the human resources of a nation and not its physical capital or its natural resources that ultimately determines the character and pace of its economic and social development”. The idea is stressed succinctly by Professor Fredrick Harbison (1973). In Todarro (2000: 236), “human resources constitute the ultimate basis for the wealth of nations”.
            Less developed countries are characterized with economic backwardness which manifests itself in low labour efficiency, factor immobility, and limited specialization in occupations and in trade, a deficient supply of entrepreneurship and customary values and traditional and social institutions that minimize the intensive for economic change. The slow growth in knowledge is a severe constraint on economic growth. The economic quality of the population remains low when there is little knowledge of the available natural resources, the alternative production techniques that are possible, the necessary skills required, the existing market condition and opportunities. To remove economic backwardness and instill the capacities and motivations to economic progress, it is necessary to increase the knowledge and skills of the people. In fact, without improvement in the quality of human factors, no progress can be possible in any developing country.
            In understanding the role of human capital as an input for growth and development, it is necessary to consider the possible links between human capital, other forms of capital, income and growth. While it is true for every country, for which there is data that more educated people earn more than less educated ones it does follow that there is a simple relationship between investing in people and countries becoming richer. Human and certain forms of physical capital may be complementary. The problem in investing is to match skills with machines. It is not a question of either investing in people or investing in machines, both and necessary. Even more important is the issue of how much to invest in alternative forms of capital equipment and skilled labour. The answer to that questions is unlikely to be the same for all countries or to remain unchanged over time.
            Health and education are both components of human capital and contributors to human welfare. About ten years ago, endogenous growth theories were advocated as a major as a major improvement compared to the traditional neoclassical growth model as invested by Solow (1956). With some justifications, the neoclassical model was said to be not overly illuminating on the causes of persistent economic growth. Today, what comes as a surprise is that the advances in growth theory have not been matched by similar advances in empirical research based on the new theories. That is, whenever it comes to the empires of economic growth, the basic neoclassical model still seems to be a good choice to begin with. The reason is that despite its simplicity, the Solow (19856), model has many predictions with regard to the international variation in income per person. And these predictions are broadly consistent with data on factor prices given the assumption that factor of production earn their marginal products. For instance, the simplest Solow model predicts that in the steady state the marginal product of labour grows at the rate of technological change. Furthermore, income per person should also grow with the rate of technological change. These predication are by end large confirmed for the untied states, where the long-run growth rate of income per person equals the growth rate of real wages and the profit rate exhibits little trend. But not all is well with the basic Solow model of economic growth. Its main weakness is that it does not consider human capital formation as a separate factor of production like physical capital and labour. Augmenting the basic model by explicit consideration of a human capital variable (Mankiw et al 1992) substantially expands its scope and of people through the process of human capital formation. Thus, human capital development is people centered strategy and not goods centered or production centered strategy of development. People are assets. It is essential to human development that these assets (people) be developed sensibly. It is not enough to use existing resources through investment in human capital development for economic growth to be achieved. The National Economic Empowerment and Development strategy (NEEDs), recognizes the centrality of human capital development in achieving economic growth and they therefore, described human capital development as a vital transformation  tool for economic growth and development.
            It has been stressed that the differences in the levels of social economic  development across nations is attributed not so much to the national resources endowment and the stock of physical capital, but to the quality and quantity of human resources. According to Oladeji and Adebayo (1996), human capital is a critical variable in the growth process and worthy of development. They are not only means but, more importantly, the ends that must be served to achieve economic progress. This is underscored by Harbinson 91973), who opined that “human resources are passive factors of production. Human beings are the active agents who accumulate capital exploit natural resources, built social, forward national development. Clearly, “a country which is unable to develop the skills and knowledge of its people and to utilize them effectively in the national economy will be unable to develop anything else.
            In the 1980’s seminal works of Romer 91986) and Lucas (1988) revolutionize the neoclassical theory of economic growth by introducing endogenous growth models. The new neoclassical theories put emphasis not a direct sources of economic growth but on mechanisms and in centives linked to dynamic of the growth itself. This new methodology set human capital as a critical factor to generate technological progress and, as a consequence steady state economic growth. Economic growth. Economic growth according to (Thingem, 2006; 1061), is a quantitative sustained increase in the country’s per-capita output or income accompanied by output or by expansion in its labour force, consumption, capital and volume of trade. Among the notable macroeconomic objectives, economic growth has been one of the most important for a long time in Nigeria because, it is the key to high standard of living, it is also brings increasing revenue, which means more and better physical and social services.
            The neoclassical theory developed by Solow and Swan (1956) centered macroeconomists attention throughout 1060s and 1970s on tangible (physical) capital formation as the driver of economic growth. However, the theory showed that, because of decreasing marginal returns in substituting physical capital for labour, the accumulation of capital would not indefinitely support a steady rate of growth in labour productivity.
            The recent literature on “endogenous economic growth” emerge primarily in an attempt to encompass the sources of technological progress and hence of sustained productivity growth within the general equilibrium framework of neoclassical growth theory. This literature has evolved to provide several district explanation of the process of economic growth, each of which carries particular empirical and policy implications.
            Romer’s (1986) “AK model” generate sustained growth by assuming that technological change is the unintended result of specializing firms investment. Creation of capacity to produce more and more to produce or specialized intermediate products is assumed to like Smith’s division of labour principle, but at the aggregate level. The resulting externalities yield increasing returns to cumulative investment and thus the production of goods can avoid the decreasing returns to rising capital intensity that the neoclassical model posted. This externalities imply that the competitive equilibrium does not coincide with that which could be achieved in an optimally planned economy.
            The later conclusion was reached by virtually all the theoretical analysis based upon successive formulations that belong to the family of endogenous growth model”. It carries the implication that growth performances might be improved by public policy actions. Subsequent endogenous growth models have fleshed out the process of technological changes through the explicit introduction of human capital and/or knowledge.
            Lucas (1988) considers human capital to be another input in the production function, not fundamentally different from physical capital, but only formed by workers through certain activities (principally education or on-the job training). Bu assuming constant returns to human capital formation, on the argument that “workers knowledge spills over”, the model can achieve a positive steady state rate of growth rate in labour productivity.
            A second line of analysis shifts attention away from treating human capital as a direct input to the production of goods; instead, it focuses upon modeling other important activities pursued by skilled labour, especially innovation. This later line of analysis brought out of the significant point that when human capital is modeled as a factor affecting innovation, the long-run rate of productivity growth is positively affected by the human capital stock’s level. Whereas in the Lucas 91988) model, the rate at which human capital is being accumulated, relative to the existing stock, was seen as a critical detrainment of productivity growth.
            The early growth model such as Harod (1939), Domar, 91946), and Solow, (1996), explanted the long run growth path of advanced capitalist economics in terms of accumulation of capital and technological progress. The role concern was the growth in income. From a developing country’s perspective, the relevance of the model is limited to extent that increase accumulation of capital is basic condition for the growth of economics.
            The early development theories accepted the important of structural transformation in the process of economic development (Lewis, 1956, FCi and Rannis 1996). These model through stylized facts of development also explain the importance of attaining structural transformation in the developing economics.
            The development economics received and added thrust with the publication Sen (1973, 1984, and 1985). He divided the whole concept of development in terms of commodities and capabilities. He emphasize the importance of capabilities over commodity approach. He admits that Gross National Product (GNP) is a measure of being that the people have, but it doesn’t tell us what people involved are doing to succeed in getting out of their means, to their ends. From the writing of Sen, one can really make the case that development achievement can not be a matter only of quantification of the income alone, but has to incorporate the actual achievement themselves.
            In the recent development in the growth theory, Romar, (1982) tries to incorporate some of the development  variables like human capital, into the growth framework. Thus, the growth theories started acknowledging the importance of development variables. Recent empirical cross country studies such as: Young, (1994) also acknowledges the importance of increased labour force participation, improvement in education and inter-sector transfer of labour from agriculture which were early part of development thinking. Thus, there has been an increased tendency of convergence between growth economics and development economics.
            There are also been attempts to empirically relate these two concepts of economic growth and human capital development (Gustar Rannis and Frances Stewart, 2001). This  study focuses on the two way relationship between economic growth (EG) and human capital development (HCD). The study views HCD as the central objective of human capital activity and EG as potentially very important instrument for advancing it. At the sometime, achievement in HCD themselves can make a critical contribution to EG. There are thus two causal chains examined, one runs from EG to HCD, as the resources from national income are allocated to activities contributing to HCD, the other runs from HCD to EG, indicating how, in addition to being an end itself, human capital development helps to increased national income. This type of framework will act as an analytical base for this research work. However, this research work will be examining only one chain, which runs form HCD to EG. The investigation will focus on whether HCD via increase public expenditure on social sector activities, gross capital formation and enrolments into primary, post-primary and tertiary institutions lead to higher economic growth.
2.2       Empirical Literature 
            At the world level, there is substantial empirical evidence that accumulation of human capital constitutes an important determinant of economic growth. This evidence is so numerous that, according to Romar (1960b: 273), “… it is a challenge for a non specialist to read even the surveys in the area”. The literature on endogenous growth theory has stimulated economists interest in the empirical evidence available from cross country comparisons, bearing on the main-level relationships between human capital formation and the growth rate of real output. The growth models that view human capital as a simple input to production, predicts that growth rate will be positively associated with charges in the stock of education, whereas models in human capital has a role in the development of innovations and its diffusion throughout the economy imply that it is the stock (rather than the flow) of human capital that affects the overall productivity and growth rate of the country.
            Early studies on the impacts of human capital on economic growth, such as Mankiw, Romar and Weil (1992) and Barro (1991), were based on data sets pertaining to a very diverse away of (more than 100) countries during the past -1960 era. They used narrow flow measures of human capital such as the school enrolment rates at the primary and secondary levels, which were found to be associated positively with output growth rates. Barro (1991) reported that the process of catching up was firmly linked to human capital formation only those poor countries with high levels of human capital formation relative to their gross domestic product (GDP) tend to catch up with the richer countries.
            Barro and Sala –i- Martin (1995), among many others, have also included life expectancy and infant mortality in the growth regression as proxy of tangible human capital, complementing the intangible human capital measures derived from school inputs or cognitive tests considered. Their finding is that life expectancy has a strong positive relationship with economic growth.
            A recent survey by Krueger and Lindahl (1998) from the econometrics studies of the cross –country growth equations shows more robust results. First, changes in the human capital stock do not seem to affect growth rates, as would be implied by the model in Lucas (1988). This constrasts with the robust evidence from the micro literature of education on income. When allowances are made for measurement errors, the changes in stock measures of education is positively correlated with economic growth. Secondly, the evidence with respect to the positive effect of the level of human capital stock on growth rates is much stronger, but the size of this effects varies across countries. 

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Two other well established results that emerged from the cross-country studies examined by Krueger and Lindahl are:
v The greater effect of secondary and higher education on growth, compared with primary education. And
v The seemingly insignificant or even negative effect of female education on the growth of output.
            With respect to the latter, they follow Barro (1999) in suggesting that the insignificant effect of female education may be a result of greater discrimination in some country’s labour market. The argument is that females receive education in these countries but are discouraged from participating in the labour markt, and thus cannot contribute directly to the growth of output. This may explain part of the problem, but it seems that other mechanisms also are at work. In countries with high female labour market participation, variation in the extent of female education have an insignificantly small positive effect on output growth rates.
            The importance of education and human capital has been brought out in many studies of economic growth and development. Robert (1991) developed a human capital model which shows  that education and the creation of human capital was responsible for both the differences in labour productivity and the differences in overall levels of technology that we observe in the in the world. More than anything else, it has been the spectacular growth in East Asia that has given human capital, peroxide by education and health, its current popularity in the field of economic growth and development countries such as Hong Kong, Korea , Singapone, and Taiwan have achieved unprecedented rates of economic growth while making large investment in education. In the statistical analysis that accompanied his study, Olaniyan and Okemakinde (World Bank, 1993), found that improvement in education is a very significant explanatory variable for Eask Asian economic growth. There are several ways of modeling how the huge expansion of education accelerates economic growth and development. The first is to view education as an investment in human capital. A different view of the role of education in the economic success is that education has positive externalities. “Educate part of the community and the whole of it benefits”. The idea that education generates positive externalities is by no means new. Many of the classical economists argued strongly for government’s active support of education on the ground of the positive externalities that society would gain from a more educated labour force and populace. Van-Dan Bery (2001) and Smith (1976), reflects such progressive contemporary thought when he wrote that “by educating its people, a society, derive no inconsiderable advantage from their instruction”. They more they are instructed, the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. Instructed and intelligent people are always more decent and orderly than the ignorant and stupid ones. Smith (1976), views the externalities to educate as important to the proper functioning not only of the economy but also of a democratic society.
            Another way of modeling the role of education in the growth and development process is to view human capital as a critical in put for innovation, research and development activities. From this perspective, education is seen as an intentional effort to increase the resources needed for creating new ideas, and thus, any increase in education will directly accelerated technological progress. This modeling approach usually adopts the Schumpeter (1973) assumption of imperfectly competitive product markets and competitive innovation, which permit the process of generating technological progress. Education is seen as an input into the intentional and entrepreneurial efforts to create new technology and new products. Proponents of this view of education point out the close correlation between new product development and levels of education. The countries that are at the forefront of technology also have the most educated population (Van –Dan –Berg 2001).
            The review of empirical fests of the theory Garba (2002), shows that cross-country regression haul shown positive correlation between educational attainment and economic growth. Odekunle (2001) affirms that investment in human capital has positive effect on the supply of entrepreneurial activity and technological innovation. Ayeni (2003) asserts that education as an investment in human capital, has future benefits of creation of status, job security and other benefits in cash and in kind.
            However, Ayara (2002) reports that education has not had the expected positive growth impact on economic growth in Nigeria. Hence, he proposes three possibilities that could account for such results, which are:-
(i)        Educational capital has gone into privately remunerative but socially unproductive activities or
(ii)       There has been slow growth in the demand for educated labour; or
(iii)     The education system has failed, such that schooling provides few or no skills.   
2.3       Human Capital Development in Nigeria
            The importance of investing in education and health is well appreciated and understood in economics that wish to attain sustainable growth. Nigeria is rated by international standard as “less developed” an thus, has economic growth as a major goal. Indeed, the importance of a prime sector such as education has been stressed in Nigeria since the early sixties, following the submission of the Ashby report (1960), during a key note address, Samusi (2002), stressed the importance of human capital development for Nigeria, saying that the Nigeria economic has to be efficient and competitive in the new world order in national frontiers no longer constitute barriers to human, material and capital flows. He noted that one of the greatest barriers facing Nigeria in this millennium is the issue of capacity building to enhance productivity in the economy.
            Government of the country or Nigeria as explained by Ogujiuba and Adeniyi (2005), primarily controls education. The summarized the breakdown of this control from the federal to the state and to the local government is primarily responsible for the tertiary institutions, although some state and private individual fund that run this level of education. Secondary education is a mainly a state responsibility, although, there are some federal secondary schools. Primary education is a local government responsibility but there also exists a national primary education commission (NPEC), which draws up the curricular for corporate bodies, individuals, religious or organizations, international agencies, non-governmental agencies and community based organization with the three times of government importance of higher education in national development in Nigeria is reflected in the goal for tertiary education as enunciated in the national policy on education (NPE 1988), which are to:-
1.         Contribute to national development through high-level manpower training                                                                                             
2.         Development and inculcated proper value for the survival of individuals and the society.
3.         Develop individual’s intellectual capacity to understand and appreciate their local and external environments.
4.         Acquire both physical and intellectual silks, which will enable individual to be self-reliant and useful members of the society.
5.         Promote and encourage scholarship and community services
6.         Forge and cement national unity.
7.         Promote national and international understanding and interactions.
            There set goals are expected to be achieved by tertiary institutions through teaching, research and development, sustainable staff development programmes, generation and disseminations of knowledge and a variety of modes of programmes. 
            Aigbokhon et al (2007) noted that a cursory look at the magnitude and tread of increase in allocation might be misleading in passing judgment on the budgetary performance until they are placed side by side with their percentage allocations. The characteristic pattern of the government’s allocation to education and health in Nigeria as a percentage of the total budget, revealed in consistency, that is, health and education expenditure were not considered as policy targets in the overall budgeting or else, they would have maintained an increasing proportion of the annual budget of the nation.
            The National Economic Empowerment and development strategy (NEEDS), which is presently Nigeria’s development plan and poverty reduction strategy paper, stipulates a goal of increasing government budgetary allocation on health and education from 8% to 10% between 2004 and 2007. While listing selected targets, education and health are rightfully noted as worthy of closer attention. Under its sectoral strategies the government and the private sector are identified as the key players in tackling issues that are critical for effective economic growth. One of each issues is inadequate human capital development. Furthering the discussion on these specific sectoral strategies the first discussed is education.
            Under NEEDS, education is considered the key bridge to the future. In this regard, the strategy aims at empowering the citizenry to acquire skills and knowledge that would prepare them for the world of productivity. In order to achieve this, NEEDs is to address the following crucial issues.
v Faithful implementation of the free, compulsory universal basic education law to among others:
i.                    Improve educational infrastructure
ii.                 Expand institutional capacity to produce quality manpower
iii.               Expand total school enrolment  
v Review of school curriculum from primary to tertiary and incorporate vocational and entrepreneurial skills.
v Re-tooling and repositioning of technical schools to be able to address the technical manpower needs of the economy.
v Establishment of more vocational centres to encourage Nigerians to embrace vocational education.
v Review of school curricular to incorporate the study of Information and Communication Technology (ICT).
v In view of Nigeria position in, and vision of economic community of West African state (ECOWAS) sub-region, review school curricular to make the study of French compulsory for primary through secondary schools.
v Expand existing special education programmes, including the virtual library project, the distance learning programme and the nomadic education programme
v Sustain the existing vocational/on-the job training programme of the federal government and encourage the stat to do the same.
v The National Youths Service Corps (NYSC) will be review with a view to using a good part of the service year to develop entrepreneurial and basic business skill in corps members.
v The orientation period of the corps members will be extended to include a one month period for formal training, on entrepreneurship.
            Following the training, corps members will be posted mainly to industrial (including small scale enterprises) and agricultural concern so that the exposure will expose them to consider the possibility of post-service self-employment.
The health sector is next for which specific sectoral strategies are listed. Major strategies of NEEDs to improve the service delivery of this key sector (health) are as follows:
v Redefinition of the roles and responsibilities of the federal ministry of health (FMOH) and other federal public health structure and institution in the provisions and findings of quality services to Nigerians.
v Reorganization and restructuring within the context of the redefined roles and responsibilities.
v Review of existing health policies and strategies as well as health legislations culminating in the publication of a new National Health Policy and the enactment health system and the health functions of each of the three levels of government.
v Improving the existing and/or setting up a new mechanism to generate and use evidence and information for health policy, programme, plan, development and implementation.
v Increase in antenatal, post-natal and family planning services and outlets to reduce material and infant mortality from the present 704/100,000 and 77/1000 respectively.
v Intensification for the campaign of the eradication of harmful traditional practices such as female genital mutilation and child marriage.

CHAPTER FOUR
4.0      PRESENTATION AND ANALYSIS OF RESULTS
            With respect to the estimated model, variables used are Real Gross Domestic Product (RGDP) as dependent variable and the explanatory variables; Government Expenditure on Education (GEE), Government Expenditure on Health (GEH). It covers the period of years 1980-2010.
4.1     Presentation of Results
            This research work employed the use of multiple regression model based on Ordinary Least Square (OLS) method. Modeling RGDPL by OLS
            RGDP              =     21844 + 1.886 GEE   +   0.758 GEH
            T*                   =      (16.863)           (2.825)           (0.839)
            S.E                  =       (12954)        (0.668)   (0.839)
          to. 025                     =          2.048                                          (0.902)
            F (2,28)          =          171.23
            F0.05              =          3.34                                       
               R2                 =            0.924416
               DW              =            0.856846

4.2       Analysis of Results

T-test: The calculated t-value for the regression coefficients of GEE and GEH are 2.825 and 0.839 respectively. The tabulated t- value is 2.048. Since the calculated t-value of GEE is greater than the tabulated t-value at 5% level of significance; we conclude that its regression coefficient is statistically significant. However, the regression coefficient of GEH is statistically insignificant.
Standard Error test: It is used to test for statistical reliability of the coefficient estimates.
S(b1) = 0.668        S(b2) = 0.902
b11/2= 0.943           b22/2 = 0.379
Since S(b1) < b11/2 and S(b2) > b21/2, we conclude that the coefficient estimate of S(b1) is statistically significant while S(b2) is not statistically significant.
F-Test: The F-calculate value is 171.23 while the F-tabulated value is 3.34 at 5% level of significance. Since the F-calculated value is greater than the F-tabulated value, we conclude that the entire regression plane is statistically significant. This means that the joint influence of the explanatory variables (GEE and GEH) on the dependent variable (RGDP) is statistically significant.
Coefficient of Multiple Determination (R2): The computed coefficient of multiple determination (R2 = 0.924416) shows that 92.44% of the total variations in the dependent variable (RGDP) is accounted for, by the variation in the explanatory variables namely Government Expenditure on Education (GEE), Government Expenditure on Health (GEH) while 7.56% of the total variation in the dependent variable is attributable to the influence of other factors not included in the regression model.
Durbin Watson statistics: The computed DW is 0.86. At 5% level of significance with two explanatory variables and 31 observations, the tabulated DW for dL and du are 1.08 and 1.34 respectively. The value of DW is less than the lower limit of the computed Durbin Watson Statistics. Therefore, there is evidence of positive first order serial correlation.

4.3      Test of Hypothesis
            The researcher examines the relative impact of human capital development on economic growth in Nigeria. With respect to this, the hypotheses are stated as follows;
ho:      Government Expenditure on Education does not have significant impact
on economic growth in Nigeria.      
H1.      Government Expenditure on Education have significant impact on   economic growth in Nigeria.           
Ho        Government Expenditure on Health does not have significant impact on
            Economic growth in Nigeria.
H1       Government Expenditure on Health have significant impact on
            Economic growth in Nigeria.
T-test is employed in testing the hypothesis. This test will help ascertain the significance of the individual parameter estimates.
Decision Rule
            If T-cal > T-tab, reject the null hypothesis otherwise accept the null hypothesis. Using 5% level of significance at 28 degrees of freedom, the tabulated T- value is 2.048 while calculated T-values for GEE and GEH are 2.825 and 0.839 respectively. Since the calculated T-value of GEE is greater than the tabulated F-value at 5% level of significance; we reject the null hypothesis and conclude that Government Expenditure on Education has significant impact on economic growth in Nigeria. However, the t-calculated value of GEH is not statistically significant; hence we conclude that Government Expenditure on Health does not have significant impact on economic growth in Nigeria.

4.4       Implication of the Result
            The regression result above shows mat Government Expenditure on Education has significant impact on economic growth in Nigeria. However, the Government Expenditure on Health does not have significant impact on economic growth in Nigeria. It is estimated from the result that Nl increase in Government Expenditure on Education (GEE) and Government Expenditure on Health (GEH) will, on the average lead to increase by N1.89K and 76kobo in Real Gross Domestic Product (RGDP) respectively. Moreover, when holding the explanatory variables constant, RGDP increases by N218,441. The sign borne by the parameter estimates are conformity with the economic a priori expectation. If government increases the expenditure on education and health, economic growth will he enhanced.

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