The Potential of Human Capital Investment in Contributing to Economic Growth: ARDL Approach in the Context of Eastern and Southern Africa

Abstract

Despite 25 years of exceptional progress in human development, there are still significant obstacles to overcome, particularly for underdeveloped nations. Numerous African countries devote substantial support to ensuring quality employment, a skilled workforce, and the building of an inclusive labour market.  Hereby, the actual paper investigates the potential of human capital investment in contributing to the economic growth of Eastern and Southern Africa from the period 2001 to 2020. The study also attempts to determine the factors that promote skilled workforces in African countries. To carry on with the examination the study used an Autoregressive Distributed Lag (ARDL) model and the Granger causality tests. The rationale behind using these models is to capture the long-run and short-run dynamic relationship among the variables and to observe the direction of these relationships. Within this framework, the results exhibited that both during the long run and short run the educational level of individuals, government expenditure in education, and labour tax contribution affect the economic growth of the region. Whereas the Granger causality test establishes a one-way causal relationship between all educational levels and economic growth. The test presented no clear connection between government expenditure on education, labour tax, and GDP. Finally, the research provides evidence about the importance of investing in human capital to promote long-term economic growth. And how the government's efforts and educational system operate in Eastern and Southern Africa, which is a geographic region that is often overlooked.