Introduction

Economic growth is one of the most important fields in economics. Since sustained economic growth is the most important determinant of living standards, there is no more important issue challenging the research efforts of economists than to understand the causes of economic growth. Human capital has been identified as a key stimulus of economic growth.

In fact, it can never be overemphasized that human capital is the engine of growth of an economy. No nation can develop beyond its investment in education in particular. Growth economists in affirmation have explained that the differences in the per capita income of countries cannot be explained in isolation from the differences in human capital development.

Health and education are both components of human capital and contributors of human welfare. Numerous economists research their relevance in the economic growth and tried to incorporate human capital in the growth model. While some researchers take a Keynesian route and stress on the demand factors, other researchers follow the neoclassical route and emphasis the role of factor supplies in growth.

Human Capital in the form of education

It is equally important to effectively and efficiently measure the human capital with the perceiving importance of human capital. Since, human capital is considered as a synonym of knowledge embedded in all levels such as an individual, an organizations and a nation, education is the primary element in the measurement of human capital.

Some economists attempted to measure the stock of human capital utilizing “school enrollment rates” as a proxy of human capital. Through the study of 129 countries for a time period 1960 to 1985, Barro and Lee, 1993 concluded that female education stimulates the acquisition of human capital through children. A fact is in accordance with the findings of De Tray, 1773 and Becker and Lewis, 1973. Barro and Lee reconcile their findings with the conclusion of De Long and Summers (1992) with the belief that “perhaps the true key is to have educated women working with machines”. (Barro and Lee, 1991, p29). However, the study of Kyriacou in 1991 concluded a negative and insignificant correlation between years of schooling in labour force and future growth. One of the possible explanations for this result is the link between human capital and subsequent growth of technology was ignored. The method of using school enrollment rates is criticized as student’s effectiveness can be recognized after participating in production activities.

Nehru, Swanson, and Dubey (1993) attempted to measure relationship between human capital and students‟ “accumulated years of schooling” in the employable age as educational attainment. Their approach to measure human capital is similar to that of Lau, Jairison, and Louat( 1991), Psacharopolous and Arriagada (1986,1992). The results show a positive relationship between education stock and its influence on income per capita. They also concluded that there is a high correlation between education stock and other human capital indicators and hence justify the usage of this variable as a proxy for human capital. Nevertheless, they note that there is a problem with the estimates of education stock due to repeat