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Human and Physical Capital: The Effects of Human Capital on Economic Development

Guest post by: African Development Bank

Article Overview: Human capital is a broad concept which identifies human characteristics which can be acquired and which increase income. It is commonly taken to include peoples’ knowledge and skills, acquired partly through education, but can also include their strength and vitality, which are dependent on their health and nutrition.

Human and Physical Capital: The Effects of Human Capital on Economic Development

Human capital is a broad concept which identifies human characteristics which can be acquired
and which increase income. It is commonly taken to include peoples’ knowledge and skills, acquired
partly through education, but can also include their strength and vitality, which are dependent on
their health and nutrition. Human capital theory focuses on health and education as inputs to
economic production. This is in contrast to the concept of human development which views
health and education as intrinsically valuable outcomes to be placed alongside economic production
as measures of human welfare. In understanding the role of human capital as an input into
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 not 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 are 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
question is unlikely to be the same for all countries or to remain unchanged over time.

Human Capital and Economic Development
Simon Appleton and Francis Teal

Related Articles
  Introduction: Human Capital and Economic Development
  Expenditure Composition and Growth
  Conclusion: Human Capital and Economic Development
  The role of human and physical capital in growth: The Effects of Human Capital on Economic Development
  Effects of education upon child schooling and cognitive development: The Indirect Effects of Investment in Human Capital

Article Tags: economic production, education, francis teal, health and nutrition, human capital and economic development, human capital theory, human characteristics, human welfare, measures, relationship, simon appleton, skilled labour, vitality



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