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.
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.
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.