Does Government Human Capital Spending Contribute to Human Capital Development? Evidence from Nigeria
Ponte Multidisciplinary Journal of Sciences and Research, Volume 73, Issue 8, Aug 2017
22 Pages Posted: 23 Aug 2017 Last revised: 10 Sep 2017
Date Written: August 20, 2017
This study empirically estimated the long-run and short-run impact of federal government human capital spending on human capital development in Nigeria. The study was motivated by the fact that despite growth in public spending in the past decade Nigeria still ranks low in human capital development. Time series data from 1990-2015 was collected and autoregressive distributed lag (ARDL) and Bounds test were used to estimate the short-run and long-run relationships respectively. The Bounds test was used to determine that a long-run relationship exists between Human Development Index (HDI) and government human capital spending while controlling for macroeconomic state of the economy using economic growth and inflation rate. The study finds that 1-year and 2-year lags of government recurrent education expenditure has weak significant negative impact on HDI rather than the expected positive impact. Only government recurrent health spending has positive impact on human capital development up to the 2-year lag. The speed of adjustment of the short-run relations is 41% significant at 5% level. The results demonstrated that both in the long and short run, government health spending has remained positive but to a very large extent insignificant to human capital development in Nigeria; whereas government education spending has not produced the desired positive impact on human capital development in Nigeria. This accounts for the low HDI of Nigeria over the years. The study therefore concludes that human capital development could be achieved through more efficient health spending in Nigeria. This study therefore strongly recommends that federal government should raise substantially the level of capital spending on education and health in order to achieve meaningful human capital development in Nigeria.
Keywords: Human Capital, Human Capital Development, HDI, Government Spending, ARDL, Bounds Test
JEL Classification: C3, H5, I1, I2
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