The Impact of Human Capital (Health / Education) on Labor Productivity

Productivity promotion has received a key attention in contemporary macroeconomic analysis. Productivity of labor driven, in particular, by human capital (health and education), is seen vitally more important. Labor qualities in terms of health and education (treated as flow and stock variables), have a bearing on labor productivity. The main objective of this paper is to identify the influence on productivity of health and education and delineate their relative impact, using a composite approach to human capital. Towards this end, an Autoregressive-Distributed Lag (ARDL) technique was applied to measure labor productivity over the period 1974-2014. Based on the result of model findings, attempt was made to evaluate their short and long term effects. The model applied in this paper has examined the impact of two key variables i.e. per capita capital and capacity index, in addition to human capital index influencing collectively on labor productivity. The results indicate that allvariables are bearing a positive and significant impact on labor productivity in the long run. The coefficient of composite human capital index was greater than that of composite human capital.