The Impact of Human Capital Development on Economic Growth in Germany (1991-2018)

Hellen Momoh

doi:10.7176/jesd/12-22-05

Abstract

This paper examined the impact of human capital development on economic growth in Germany from 1991 to 2018, using time series data from the World Bank Indicator and the National Bureau of Statistics. In Germany, the service industry accounts for up to 85% of total employment, with a heavy focus on education, research, the cultural and creative sectors as well as health services. Despite being shrunk since reunification, the public sector continues to account for the vast majority of employment. The health services industry, which employs over 180 000 people in Berlin, is the most significant economic sector. As the most common type of organization in the private sector, small and medium-sized firms account for 80% of total employment in Berlin. Berlin's social structure is characterized by a significant migrant population, which is reflected in its economy. The goal of this research was to investigate the link between human capital indices (education and health) and economic growth. The ordinary least square regression analysis is used in this study to examine the impact of human capital development on German economic growth from 1991 to 2018. The empirical findings show that human capital development has a significant impact on economic growth, as measured by GDP. According to theory, the human capital development indicators of secondary school enrollment, primary school enrollment, gross capital formation, total labor, gross domestic product and life expectancy have a positive and statistically significant run long impact on Germany’s economic growth, implying that these indicators are critical in achieving growth in the German economy in the long run. Life expectancy and gross capital formation, on the other hand, have a positive and statistically significant impact on Germany's economic growth in the short run. According to the study, the German government should ensure that adequate resources are allocated for human capital development in order to boost economic growth in Germany. Keywords: Human Capital, Economic growth, Gross Domestic Product (GDP) and Life expectancy DOI: 10.7176/JESD/12-22-05 Publication date: November 30 th 2021

Highlights

An increase in productivity is the primary source of per capital output in any country, whether developing or developed, with a market economy or one that is centrally planned
Without a doubt, the study's empirical analysis shows that the level of human capital development in Germany has significantly influenced the level of their economic growth
Human capital development in Germany has a positive relationship with economic development

Summary

Introduction

An increase in productivity is the primary source of per capital output in any country, whether developing or developed, with a market economy or one that is centrally planned. Per capita output growth is an important component of economic well-being (Abramowitz, 1981). The impact of human capital development and economic growth has emphasized the growth theory (Romer, 1986; Lucas, 1988). As the global economy shifts toward more knowledge-based sectors, the development of skills and human capital becomes a critical issue for policymakers and practitioners involved in economic development at the national and regional levels (OECD 1996). Human development refers to the process of acquiring and increasing the number of people who have the necessary skills, education, and experience for a country's economic and political development

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