Human Capital And Economic Growth In Malaysia: A Simultaneous Model

Abstract

The relationship between economic growth and human capital has long been recognized. Many studies especially in western economies have shown that human capital has a positive impact on economic growth. However, a few studies conducted also show the impact of economic output on human capital. In Malaysia, human capital investment is becoming an important aspect of the development agenda for which a large percentage of its expenditure is being allocated. This study attempts to analyse the relationship between economic growth and human capital in Malaysia using a simultaneous equation model. Human capital variables are represented by literacy rate, life expectancy at birth and government expenditure on education, while economic growth is measured using real gross domestic product.