The Link Between Human Capital Formation and Economic Growth in East Africa

Abstract

The East African Community members' strategy is focused on achieving smart, sustainable, and inclusive economic growth. This cannot be achieved without the major contribution of skills, knowledge, and innovation, commonly known as human capital formation. It is difficult to believe that these goals could be realized without a good education and training system, training development, better health sector infrastructure, a large diffusion of knowledge in the manufacturing and service sector, and a great effort to create a research-intensive agricultural economy. Most East African economies lack a number of these growth pre-take-off conditions. Employing neoclassical augmented Solow growth theory as the theoretical framework and using panel methodology, the study investigated the role of human capital resources as a factor in stimulating output growth in East Africa. The findings showed that human capital formation was positive and significant to economic growth in East Africa. This study argues that policies and strategies that advocate for accelerated public investment in human capital development will promote productivity growth and further stimulate resilient economic growth in the East African economies.

Keywords: Human capital, economic growth, education, health, panel

JEL Classification: J24, I15, I22