by ezechukwu Uchenna

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AN ECONOMETRIC ANALYSIS OF GOVERNMENT
EXPENDITURE ON HUMAN CAPITAL DEVELOPMENT
AND ECONOMIC GROWTH IN NIGERIA
AN M.Sc PROJECT PROPOSAL
BY
EZECHUKWU UCHENNA
PG/M.SC/2010/57503
Email: uchenna.ezechukwu@yahoo.com
MOBILE +2348037400466
DEPARTMENT OF ECONOMICS
UNIVERSITY OF NIGERIA, NSUKKA.
SUPERVISOR Dr (Mrs.) S I MADUEME
NOVERMBER 2012

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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The belief that human capital is an engine of growth rests on the implementation of quality
and quantity of resources devoted to that sector in any country , as it stood out as generally
acclaimed impetus for the actualization of sustainable growth and development in an
economy. These have been the main targets of the developing countries to raise their welfare,
as when compared to the developed economies, will meet standard. This is because when you
ask about the major determinants of economic growth in an international perspective, an
economist and the World Bank, is likely to point out the importance human capital formation
play in an economy. Taking a closer look at this argument, it becomes clear how important the
presumed role of human capital is at the macroeconomic level. The developed nations like
Spain, America and a few other Asian countries like Taiwan, South Korea and China` have
long realized the importance of human capital as strategic effort towards economic
development of their nations and have invested huge resources in that area (Owolabi and
Okwu, 2010). Hence policy makers in the developing world need to focus on human capital
formation and should carefully devout a large amount of their resources in that area.
The past half century or so has witnessed unprecedented growth and development in
human capital in both developed and developing countries, while in most measures they have
improved more dramatically in developing countries. As a result of that, there has been some
international convergence in these measures (Todaro and Smith, 2009). Some of the generally
agreed causal factors responsible for the impressive growth of the economy of most developed
and the newly industrializing countries are an impressive commitment to human capital
formation (Adedeji and Bamidele, 2003; World Bank, 1995). This was largely achieved
through increased knowledge, skills and capabilities acquired through education and health by
all the people of these countries. Hence it is important to assign greater emphasis on the role
of human capital as a major contributor to economic growth and development in the world
economy. However what is still debatable is, what factors should be considered as human
capital formation?

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Human capital formation refers to ‗‘the process of acquiring and increasing the number of
persons who have the skills, education and experience that are critical for economic growth
and development of a country‘‘ (Okojie 1995:44). While human development is a process of
enlarging people‘s choices, including living a long and healthy life, being educated, and
having access to resources that are essential to achieving decent standard of living (Human
Development Report, 1990). One of the early researchers in the area of relevance of human
capital resource in growth process was Schultz (1961). He identified five ways by which
human resources can be developed to include: health facilities; broadly conceived to include
all expenditure that affect the life expectancy, strength and stamina, and the vigour and vitality
of the people; on-the-job- training; formally organized education at the elementary, secondary,
and tertiary levels; study programmes for adults that are not organized by firms, including
extension programmes notably in agriculture and migration of individuals families to adjust to
changing job opportunities. This view is corroborated by the (United Nation Economic
Commission for Africa, 1988) and (Awopegba, 2002) when they argued that human capital is
the knowledge, skills, attitudes, physical and managerial efforts required to manipulate
capital, technology, land and materials to produce goods and services for human consumption.
This human capital is often conceptualized as an aggregate function including both
health and education (Todaro and Smith, 2003), As Lawanson (2009) had pointed out, health
and education as two closely related human [resource] capital components that work together
to make the individual more productive. Hence, taking one component as more important than
the other is unrealistic as a more educated individual, who is ill, is as inefficient as an
illiterate. Therefore, both components are equally important because of their close
relationship. For example, government expenditure on health and education raises the
productivity of labor and increase the growth of national output. Providing people with better
education and health will satisfy their needs, and improve their productivity in such a country.
The quest for human capital development has been a major cornerstone of our integrated
development effort in Nigeria. At the aggregate level, a better educated and healthy workforce
is thought to increase the stock of human capital in the economy and increase its productivity.
It is critical for the development of human capital and the enhancement of the productivity
and competitiveness of the territory. While the recent period of economic growth has resulted
in significant improvements in government expenditures and general social wellbeing of the

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population, there is growing concern over the ability of the relevant social services (education
and health) to cater efficiently for the needs of the larger population.
Government expenditure on human capital (such as education and health care) has been
generally considered as the main distributive policy instrument of any government, especially
by the developing countries (Bourguignon and Luiz, 2003). Similarly health is an important
element to the nation as it raises the expectancy of life which means larger returns to the
education development and growth as working life of the individual expands (White, 1975).
Analyzing government expenditure on education and health care in human capital
development and its effects on economic growth will be the key to understanding the rationale
for the investment in the sector, being as necessities, basic and compulsory needs of human
population. Greater attention should be giving to human capital in its own right, even in
emerging economies, because the rationale for investing in human resources centered on the
belief that human resources play a crucial role in the process of economic growth and
development. So national government needs to spend more on education and health but how
much to spend and the extent of its impact on the economy is yet to be ascertained. Thus this
calls for an empirical investigation.
1.2 Statement of problem
Good education and better health care should be the primary objective of any committed
government, because of its contribution on human capital development as endogenous
theories postulate that human capital spurs economic growth. It is perhaps in recognition of
this that academic researchers and policy makers have been preoccupied with analysis of
government expenditure on education and health as a measure for human capital development.
As a matter of fact, the role of education and health in any economy is more crucial today than
ever before because of the knowledge based globalize economy. Such attention is also rooted
in the fact that productivity greatly depends on the quantity and quality of human resources,
which itself largely depends on investment in education and health. So the question as to
which extent government expenditure on human capital (education and health) causes
economic growth? Has been a basic concern for economic researchers.
Spending by the various regimes in Nigeria in most sectors, especially the social sectors
seem to remain inadequate. It is this inadequacy of investment in the human capital that

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impedes the growth in the under-developed countries (Lekhi, 2008). Nigeria inclusive, then
when compared the condition of the human capital development in Nigeria, it looks much
feeble. However, the state of the economy of Nigeria is rendered more unstable because of the
different political regimes that have prevailed in the country for over four decades in terms of
expenditure pattern towards human capital development. Education and health are very
relevant to human capital development, but the sectoral allocation to them during military
regimes and civilian regimes exhibits some fluctuation in the investment pattern. With the
advent of democracy in 1999, the federal government allocation to education and health has
been on the increase and seems to be much higher than the average in the years of military
regimes, This inconsistency in channeling of funding of government expenditure on education
and health sectors has generated problems of shortage in human capital development in
Nigeria (Durosaro, 2000). As a result of these, the indices of health and education including
infant and maternal mortality rates, life expectancy at birth, population per physician, adult
literacy rate, gross primary and secondary enrolment ratio have been low in Nigeria. In the
same vein, the level of resource commitments to health and education compare very
unfavorably with the situation in other developing countries. The most pressing issue has to
do with whether such expenditures have any significant improvement in human capital
development and whether they have translated into the growth of the economy. This is
worrisome and poses a serious threat to achieving MDGs 2015 and vision 2020 agenda.
Given the current emphasis on education by the United Nations (UN) and MDGs of
achieving education for all by the year 2015, Nigeria is still lagging behind. According to
Central Bank of Nigeria (CBN, 2000), poor financial investment has been the bane of
Nigerian education system to the extent to which the budgeting allocation has been very low
compared to others. Available statistics from CBN statistical report of various years show that
government expenditure on education and health have continued to fluctuate in Nigeria, as
well as the characteristic pattern of the government‘s allocation to education and health in
Nigeria as a percentage of the total budget has revealed inconsistency. That is, health and
education expenditure were not considered as policy targets in the overall budgeting
(Lawanson, 2009). With this we tend to ask what has been the variation between the different
regimes of government in Nigeria via expenditure pattern on human capital development.

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The justification for higher government spending is often based on the impact on
individual‘s life time income. According to Jhingan (2002) lack of investment in human capital
has been responsible for the slow transformation of the developing countries compared to those
in other developed countries. Thus emphasis on increasing expenditure on education and
health is generally justified on the basis that such spending increases enrollment rate in
schools, literacy level in that economy and reduces the impact of diseases on the productive
life of the population, as better health improves expectation of life which increases high life
expectancy in that economy. Despite the effort of the government to boost its expenditure on
human capital development the outcomes are still questionable. This is particularly worrisome
as this work tends to answer the following questions:
1 To what extent has the government expenditure – education and health on human
capital development impacted on economic growth?
2 What is the nature of the relationship between government expenditure – education
and health on human capital development outcomes?
3 Is there any significant difference in human capital development – education and
health in military and civilian regimes?
1.3 Objectives of t he study
The broad objective of this study is to analyze government expenditure on human capital
development in Nigeria. The specific objectives that will guide us in this research study are;
1 To estimate the extent to which government expenditure on health and education has
impacted on economic growth in Nigeria.
2 To determine the causal link between government expenditure (education and health)
and human capital development outcomes in Nigeria
3 To determine the differences between impacts of government expenditure on health
and education on economic growth in democratic and military regimes in Nigeria.

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1.4 Research hypothesis
The following hypothesis will be tested;
Ho; Government expenditure on human capital development has not impacted
significantly on economic growth.
Ho; There is no causal link between government expenditure on human capital
development outcomes in Nigeria
H0; There is no significant difference in the impact of government expenditure on
health and Education on economic growth in military and civilian regimes in
Nigeria.
1.5 Significance of study
This work will produce an updated literature which will be used as an important material
for future researchers in this area and as well as assist students in the provision of a functional
framework on which future research on this area can be carried out. Also the result of this
study will be informative as to whether the existing investment in human capital development
is productive. This work will also be of great importance to the government which has in its
hands the authority and responsibility over important input indicators of human capital
development, Also the results of this study will be helpful to policy makers in designing
appropriate policies aimed at utilizing the human resources of the country, giving priority to
the development of human capital. It will also show which regime (civilian or military)
impacted more on economic growth through their expenditure pattern, which the information
will be useful for planning and policy making.
1.6 Scope of study
This study will focus on Nigeria; the scope will be limited to the education and health
sectors as important components of human capital. The variables of interest will be: federal
government capital and recurrent government expenditures on education and health, gross
enrollment rate in primary, secondary, tertiary educations, literacy rate, infant mortality rate,
life expectancy and Gross Domestic Product (GDP). The study will cover the period 1970 –
2011. Military regimes will cover 1970-1978, 1984-1998 and democratic regime will cover
the period from 1979-1983, 1999 - 2011.

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CHAPTER TWO
LITERATURE REVIEW
2.1 CONCEPTUAL FRAME WORK
Government expenditures refer to the expenses that the government incurs for its own
maintenance, for the society and the economy as a whole. Government spending reflects the
policy choices of government; this expenditure is classified under capital and recurrent. This
government spending toward education and health is driven by the objective to positively
affect growth through improvement on outcome such as; school enrolment, primary,
secondary and tertiary and literacy rate on the part of education and life expectancy, infant
mortality rate and so on, on the part of health. Using capital and recurrent expenditure on
education and health provides an insight into the investment priorities of government while
the enrolment and literacy rate are chosen because these measures are appropriate for
assessing the accumulated achievement of a country or for estimating the contribution of
expenditure on education to economic growth. On the part of health, the two variables are
chosen because government health expenditures are not monolithic and often consist of
budgets for sub-sectors within the health care sectors such as primary care, secondary care,
etc, infant mortality rate are considered as an example of an outcome in primary care, and life
expectancy as an example of an outcome from secondary care while the commonly used
measure for (health) human capital is the life expectancy. Afterward the outcomes could have
direct effects in the same and opposite directions and that spurs economic growth. Life
expectancy is defined by the United Nations as the average number of life years since birth
according to the expected rate of mortality by age. Jacobs and Rapaport (2002) shows that
analysts prefer to focus on a survival time indicator because it emphasizes the duration of
health status and places implicit importance on a person‘s well-being. For example, Anand
and Ravallion (1993) using cross-sectional data for 22 developing countries in 1985 find that
health expenditure raises life expectancy.

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Figure 1 explains a flowchart of inter-connectivity of choice variables.
Source; Field work (2012)
2.2 THEORETICAL FRAMEWORK
2.2.1 THE THEORIES ON INCREASING PUBLIC EXPENDITURE
Public expenditure on infrastructural facilities plays an important role in stimulating the
economy. The mechanism through which this government spending on public infrastructure
affect the pace of economic growth depend largely upon the precise form and size of total
public expenditure allocated to economic and social development projects in the economy. In
general, different theories on the relation can be roughly classified into different economic
schools of thought, like: THE KEYNESIAN vs CLASSICAL VIEW AND WAGNER’S AND
WISEMAN - PEACOCK THEORY
2.2.1.1 Keynesian vs classical view, Keynesian view assumes that government expenditure
is an instrument of the state in exerting fiscal policy and with this instrument influences
economic growth while the Classical and the Neo classical Economists do not see any reason
why government should intervene in the economy. Keynesian school of thought advocates the
use of fiscal instruments to stimulate economic activities in time of recessions. While the
Classicists are of the opinion that the market forces will automatically bring the economy to
Government expenditure
Allocation composition
Capital and Recurrent HealthEducationOutcome Outcome
Primary, secondary and tertiary
enrollment
Literacy rate
Life expectancy
Infant mortality
Economic growth

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long run equilibrium through adjustment in the labor market. Keynesian argued that market
mechanism regulation of the economy will fail to propel the economy back to equilibrium in
the face of any maladjustment due to the rigidities inherent in the labor market. Thus,
Keynesian thought, prescribed expansionary fiscal policies to avoid long recessions, because
of the effects of crowding out phenomena, that there is the tendency for public goods to be
substituted for private goods; this will create a gap in the private spending on some economic
activities like education, health and other goods and services. The Classical school found
fiscal policy to be ineffective, that, the pressure of the public sector to increase their spending
may compel them to source for financial resources in the credit market. This will result into
higher interest rate which may hamper private investment.
2.2.1.2 Wagner and Wiseman-Peacock theory, Wagner revealed that there are inherent
tendencies for the activities of different layers of a government (such as central, state and local
governments) to increase both intensively and extensively. He maintained that there was a
functional relationship between the growth of an economy and government activities with the
result that the governmental sector grows faster than the economy. However Nitti (1903) not
only supported Wagner‘s thesis but also concluded with empirical evidence that it was equally
applicable to several other governments which differed widely from each-others (Nitti, 1903).
All kinds of governments, irrespective of their levels (say, the central or state government),
intentions (peaceful or warlike), and size, etc., had exhibited the same tendency of increasing
public expenditure. But on the other hand, Wiseman and Peacock in their study of public
expenditure in UK for the period 1890-1955 revealed that public expenditure does not
increase in a smooth and continuous manner, but in jerks or step like fashion. At times, some
social or other disturbance takes place creating a need for increased public expenditure which
the existing public revenue cannot meet.
2.2.2 EXOGENOUS AND ENDOGENOUS THEORIES ON HUMAN CAPITAL
2.2.2.1 The Traditional Neoclassical Growth Theory (Exogenous) Traditional
neoclassical growth models championed by Solow and Swan in the 1950s attribute output
growth to the impacts of physical capital and population, neglecting human capital as an
important input. The notion of growth as increased stock of capital goods was codified as

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exogenous growth model; which involves a series of equation which showed the relationship
between labor time, capital goods, output and investment. This model, by Solow and swam
was the first attempt to model long-run growth analytically. This model assumes that
countries use their resources efficiently. The predictions of this classical model were:
increasing capital relative to labor creates economic growth; poor countries with less capital
per person will grow faster because each investment in capital will produce high return;
economies will eventually reach a point at which no new increase in capital will create
economic growth. This point is called Steady state. This model also notes that countries can
overcome this steady state and continue to grow by investing new technology. The process by
which countries continue to grow is exogenous and represents the creation of new technology
that will allow production with fewer resources. Two major drawbacks of this theory include:
the impossibility of analyzing the determinants of technological progress within its
framework; the failure of the model to explain the large differences in the residuals across
countries with similar technologies. These led to a widespread discontentment with the
neoclassical models (Todaro, 2003).
2.2.2.2 New Growth Theory
The theory much better suit this work is endogenous growth theory. This is because of
the inclusion of human capital in the model as the model predicts that the economy can grow
forever as long as it does not run out of new idea. Since the literature on endogenous growth
focuses on the dynamic impacts of human capital stock on growth; it proves to be reasonable
to state that government expenditures as the integral part of human capital may have long-run
effects on economic growth. Thereby, the insights of endogenous growth theory, in which
provision of human capital adds much to the rate of growth of economies rather than the
initial level of per capita product of countries is of much more relevance to the disaggregated
analysis of impacts of public expenditures on economic growth (Barro and Sala-i- Martin,
1990). This will form the basis of our study, because it can be inferred that endogenous
growth theory indirectly provides the government with a theoretical justification in order to
actively engage in projects to promote growth process in the context of expenditures on
human capital heading for augmenting output per capita through provision of sound health
and education services.

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The endogenous growth theory or new growth theory is developed as a reaction to the
flaws of the neoclassical (exogenous) growth theory. Romer endogenous growth theory was
first presented in 1986 in which he took knowledge as an input in the production function. The
major assumptions of the theory are: increasing returns to scale because of positive
externalities; human capital (knowledge, skills and training of individuals) and the production
of new technologies are essential for long run growth; private investment in research and
development is the most important source of technological progress; knowledge or technical
advances are non-rival good. In the New growth theory, the savings rate affects the long run
economic growth because in this framework, a higher level of savings and capital formation
allows for greater investment in human capital development. The model predicts that the
economy can grow forever as long as it does not run out of new ideas or technological
advancement.
Romer states the production function of a firm in the following form:
Y = A(R) F (Ri, Ki, Li)
where:
A - Public stock of knowledge from research and development (R),
Ri - Stock of results from the stock of expenditure on research and development.
Ki - Capital stock of firm i
Li - Labour stock of firm i
The Ri actually represents the technology prevalent at the time in firm i. Any new research
technology spill over quickly across the entire nation. Technological progress (advancement)
implies the development of new ideas which resemble public goods because they are non-
rival. When the new ideas are added as factors of production the returns to scale tend to be
increasing. In this model new technology is the ultimate determinant for long run growth and
it is itself determined by investment in human capital development. Therefore, Romar takes
investment in human capital as endogenous factor in terms of the acquisition of new
knowledge because in this framework, investment in education and health allow for greater
growth in human capital development.
The first generation of endogenous growth models, in which the rate of technological
progress varies from country to country depending on local economic conditions, predicts a
permanent effect on the growth rate. The growing focus on the Millennium Development

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Goals (MDGs) has further highlighted the importance of making tangible progress in
indicators of human capital measured on the basis of key education and health indicators
(MDG, 2008; Howitt, 2005). Recently a number of millennium development goals (MDGs)
are directly related to education and health, which are to: achieve universal primary education;
reduce child mortality; improve maternal health; combat HIV/AIDS, malaria and other
diseases. All these MGDs have strong linkages to education and health. The overarching goal
is the eradication of extreme poverty, for which the development of human resources through
education and health is key. By endorsing these goals, countries essentially recognize
education and health as priority areas for investment action and policy formulation.
2.3 THEORITCAL LITERETURE
2.3.1 The concept of human capital
There are different definitions and views of human capital by different scholars, those
viewing human beings as capital rooted in economic thought has been looked at by many
economists including Adam Smith (1776). He defined human capital as all the acquired and
useful abilities of all inhabitants of the country. Irving Fisher (1906) looked at the concept of
human beings as capital while Marshall (1890) however, did not believe in treating human
beings as capital, instead rejected the notion of "Human Capital" and defined Capital as "all
stored up provision for the production of material goods, and for the attainment of those
benefits, which are commonly considered as part of income". Capital to him consists of
knowledge and organization: and of this some part is private property and the other part is not
(Marshall (ibid), pp 114 -115).
Human capital witnessed a revival in the U.S economic journal in the 1960's as a result of
many economists' efforts such as Schultz (1971) who is considered as the founder of the
human capital theories. Schultz observes that the failure to treat human resources explicitly as
a form of capital, as produced means of production, and as the product of investment, has
fostered the retention of the classical notion of labour as a capacity to do manual work
requiring little knowledge and skill. Schultz (ibid) noted that by investing in themselves,
people can enlarge the range of choices available to them and enhance their welfare. For him
the concept of capital consists of entities that have the economic property of rendering future
services of some value and should not be confused with capital as a fungible entity

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The concept of human capital refers to the knowledge, skills, attitudes, physical and
managerial effort required to manipulate capital, technology, and land among other things, to
produce goods and services for human consumption (UNECA, 1990).Romer (1994) defines
human capital as a factor of economic growth, which captures the abilities, skills and
knowledge of workers. Adamu, (2002) revealed that human capital refers to the abilities and
skills of human resources of any country. This shows that human capital is a form of resource
that can be acquired, built up and developed, while Igun (2006) defines human capital as the
total stock of knowledge, skills, and competence‘s innovative abilities possessed by the
population.
2.3.2 Human capital development in Nigeria
The urge in Nigeria to invest in human capital development could not have been for the
sake of investment alone, but in line with the national philosophy. At best, for any meaningful
and rapid transformation to take place in Nigeria, it is considered more reasonable to
concentrate on the improvement and development of the available human resources
(Akinbote, 1988). In Nigeria, effort toward commitment to investment in human capital
began in 1959, which was immediately after her independence when Ashby Commission was
set up to conduct an investigation into Nigeria‘s needs in the field of post-school certificate
and higher education for the subsequent 20 years. The Commission documented report which
was submitted in 1960 with the help of leading and seasoned expert in human resource
matters, Frederick Harbison. That report led to massive investment in education which was
then seen as the only means of human capital formation.
Investment in those areas is well appreciated and understood in an economy that aspires
to attain sustainable growth, because investment in these human resources means expenditure
on education and health and other social services in general. Hence any country that does not
pay special attention to human resources development should not expect to grow and develop.
In recent times the importance of human resource development for Nigeria has been stressed
if the country has to be efficient and competitive in the new world order in which national
frontiers no longer constitute barriers to human, material, and capital flows.(Owolabi and
Okwu, 2010).

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The government set up National Economic Empowerment and Development Strategy
(NEEDS), which is presently Nigeria‘s development plan documented and stipulates a goal of
increasing government‘s budgetary allocation to health, road, security, education and so on in
its effort to boost human capital sectors, The programme include; to address the crucial issues
to improve education and health infrastructure and expand institutional capacity to produce
quality manpower which will expand total school enrolment. As a result of that, the federal
government recently licensed more federal universities in effort to absorb all candidates
seeking admission into national universities. This shows commitment on the part of the
Nigerian government to develop her human resource. Furthermore, additional private
universities had also been licensed and more are still expected to be given license since the
number of students seeking admission into tertiary institutions is on the increase in the
country and effort to absorb them lead to this policy.
The health care in Nigeria is a shared responsibility of all the three tiers of government.
The basic health care are primary, secondary and tertiary health, the primary health care is
seen as the equity-oriented health and development strategy focusing on the most health
intervention for the most common health problems in communities. With the sole
responsibility for educating the communities with health problems, preventing and controlling
of locally endemic diseases and promotion of food supply and nutrition‘s etc. While the
secondary health care exist to provide specialized services to patients referred from the
primary health care level. Secondary health care is expected to provide administrative support
to and supervision to subordinate, while the tertiary health care which is the apex body
specialized in providing care for specific cases and conditions. As better health care is a
primary human need, fifty percent of economic growth differentials between developed and
developing nations are attributable to ill-health and low life expectancy (World Health
Organization, 2005).
2.3.3 Profile of Federal Government Expenditures on Education and Health Sectors in
Nigeria
National development agenda are premised on economic growth which is a necessary
condition for development. However, the growth in the public sector appears to apply to most
countries regardless of their level of economic and political development (Essien & Bawa,

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2005). The aim of government is to attain better allocation and distributional equality through
improved disbursement of public goods. Similarly, the Nigerian government‘s expenditure
performance in education and health care sectors has experienced periods of improvement and
decline. Good performance in these areas is essential to development and numerous
governments recognized this in their policy statements
Data on federal government expenditure on human capital (health and education) in
Nigeria is not mute for the period 1970 – 2011. Public total health expenditure in the 1970s
witnessed fluctuating trend. In 1970, it stood at N25.18 million and decline in 1973 to N21.36
million. It later rose to N76.99 million, N158 million in1975 and 1980 respectively, but it
declined sharply a year later to N141.82million. It rose again to N587.7 million in 1990 and
thereafter continued to fluctuate with a declining trend until 1996 when it rose to
N2098.08million. It stood at N15245.28 million in 2000, N34187.74 million in 2004 and
N55675.33 million in 2007 and N90213 million in 2009. While on the part of education
sector, the federal government spent a total of N25.84million and N963.77million in1970 and
1975 respectively and in 1979 expenditure decline to N764.53 million. By 1980, total
educational expenditure increased to N2612.51 million, decreasing to N1412.6 million 1985
and N918.11 a year after, while in 1990 it increased to N4498.8 million and N18962 million
in 1990 and 1995 respectively, while in 2000 and 2006 expenditure stood at N85921.84
million and N165975.86 respectively.(CBN,2010). Till date expenditure on education sector
has been on the increase, this might be attributed to the effort of the government to meet up
with 26 percent recommended by UN. Also the governments of Nigeria, over the years have
been making frantic efforts at ensuring that there is an increase in the level of public
expenditure on health, as poor health conditions harm the productivity of the citizens, thus, the
level of government expenditure on health determines the ultimate level of human capital
development which eventually leads to better, efficient and productive investment in other
sectors of the economy (Akran and Khan, 2007).
2.3.4 The Role of Education as Component of Human Capital
The role of education in human capital development and growth of Nigeria economy has
been underscored in many studies. Education, as a key component of human capital formation
is recognized as being vital in increasing the productive capacity of people. It increases

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knowledge which helps to produce more output in relatively smaller time and also it is
intuitionally suggested that an educated person could learn much faster. Sen (1985) opined
that education helps provide human capabilities, which is ― important and individual power to
reflect, make choice, seek a voice in a society and live a better life‖ as such government
should increase awareness programme in the education sector and invest in that area. World
Bank (2000/2001) showed that investment in education and other forms of human capital
particularly health is an important element of poverty strategy, hence, increase in the level of
education will also lead towards better health due to an increase in the awareness of the
benefits of healthy living, which in turn increases the output. However, education also
enhances the labor force participation in an economy due to the higher labor force
participation rate, along with education, the role of experience is also very important in
productivity growth, as experience generally reduces the chances of errors and increases the
output in a given time period.
In effort to boost education in Nigeria, the report of Ashby Commission came up with
expansion of the educational sector to 6-3-3-4 education system in 1984. Where pupils now
spent six years to get primary education, six years in secondary school (three years of junior
secondary and three years of senior secondary education) and four years of higher education.
With the Nigerian government recognition of the role of educational human capital in
economic development, it embarked on quantitative and qualitative measures of expansion of
educational facilities at all levels because of its presumed advantages. The Federal
government is principally responsible for the funding of tertiary institutions; secondary
education is mainly a state responsibility though there are some federal secondary schools.
Primary education is a local government responsibility. The level of expansions in the
educational system as a result of the outcome of government vigorous expenditure from 1970
– 2011 are shown below.
The gross enrolment rate in primary school were 40 percent in 1970, 48.26 percent in
1976 and 93.80 and 104.41 percent in 1980 and 1984 respectively there were declining
thereafter to 86.62 in 1995 and 1999 and 2007 enrolment rate were 93.00 and 94.18 percent
respectively, while at 2010 enrolment stood at 83.28 percent. The secondary enrolment was
4.26 percent in 1970; it raised further to 13.45 and 28.90 percent in 1980 and 1985
respectively, enrolment rate declined to 23.88 percent in 1989, rising afterwards to 31.89

18. 18
percent in 2003, in 2005, it stood at 34.44 percent while 2008 and 2010, secondary enrolment
had risen steadily, and stood at 38.99 and 44.05 percent respectively. The tertiary education
sector enrolment rate was 0 .71 percent in 1975, this later rose to 1.78 and 3.35 in 1980 and
1985 respectively. While from 1999 enrolment stood at 6.01 percent they had been an
increase in 2003, 2007 from 9.73 to 10.26 percent, (UNESCO, 2010). Hence a close look at
this trend shows that Nigeria government from 1999 till date, have underscored the need to
invest substantially in the educational sector, this is noticeable improvement that should be
sustained. As there is evidence those higher rates of school enrolment raise growth ( Mankiw
et al., 1992).
2.3.5 The Role of Health as a Component of Human Capital
It have been noted that healthier individuals might affect the economy in four ways: (a)
they might be more productive at work and so earn higher incomes; (b) they may spend more
time in the labor force, as less healthy people take sickness absence or retire early; (c) they
may invest more in their own education, which will increase their productivity; and (d) they
may save more in expectation of a longer life—for example, for retirement—increasing the
funds available for investment in the economy (Bloom, 2000 and Canning, 2003). Health is
generally connected with economic growth and sustainable development; because of the
evidence that investing in health brings substantial benefits to the economy. Considering the
indices of health status of Nigeria, there seems to be some fluctuations since independence.
During the early 1970s, Nigeria was recorded among the promising economies in Africa, but
today, corruption has purge the country into high level of poverty, high cost of living, low
average life expectancy, high rate of communicable diseases and increase in mismanagement
of her resources etc. A lot of resources has been spent on the health sector, but the most
pressing issue has to do with, whether such expenditures have any significant impact on the
health of the nation‘s population and whether they have translated into the growth of the
economy (Dauda, 2011).
In a study on government spending on health as a percentage of GDP embarked for some
selected African countries, it was ascertain that Nigeria devote the least percentage of her total
expenditure to health when assessed with other selected African counties. For instance in
1997 Nigeria devoted only 2.8 percent of total spending of her GDP to health sector financing.

19. 19
This figure in 1999 rose to 3.0, while a further increase of 3.4 percent was noticed in 2000.
While Cote D'ivore and Ghana within the same period of 1997 and 1999 devoted 6.2 and 4.1
percent respectively to health sector financing, the spending on health financing for Cote
D‘Ivore was sustained throughout the years up till 2000, while Ghana was reported to have
increased her budgetary spending for health from 4.1 percent as noticed in 1997 to 4.7 percent
in 2000 (WHO Report, 2004).
It is assumed that improvement in health leads to improvement in life expectancy which is
a robust indicator of human capital development, a simple channel through which health
affect human capital development is by improving living conditions. As living conditions
improve, human longevity is expected to improve and vice-versa. Taking life expectancy of
Nigeria from 1970 to date for example, from the World Development Indicators (WDI),
Nigeria life expectancy as at 1970, stood at 40 years. It increased to 45 years in 1980; by 1990
it stagnated at 45 years 10 years after. marginal increase were noticed by 2000 to 46 years, by
2005, it was given as 47 years and still remained at 47 years by 2009 notwithstanding the
huge expenditure by the government on health.
An increasing life expectancy at birth by 10% will increase the economic growth rate by
0.35% a year, as 50% of the growth differential between rich and poor countries is due to ill-
health and life expectancy (see Commission on Macroeconomics and Health, 2001)
According to Bloom and Canning (2008), ―health is a direct source of human welfare and also
an instrument for raising income levels. The level of productivity and growth in an economy
will be greatly hampered by ill-health or prevalence of diseases in such an economy. This is
because the likelihood exists that healthy individuals have the tendency to think rightly, be
more efficient and obtain higher productivity. There is consensus that expansion in the skills,
knowledge, and capacities of individuals, increasing human capital, is critical for economic
growth and poverty reduction. However, despite increase in government health and education
spending in recent decades as shares of both GDP and total government spending, human
capital investments, particularly in Sub-Saharan Africa, are performing poorly with low
school enrollments and growth in child labour often performed at the expense of education
and inadequate health.

20. 20
2.4 EMPIRICAL LITERATURE
There has been numerous research works on human capital development on cross-country
and country specific studies, these macro studies continued to produce inconsistent and
controversial results (Pritchett 1996). Reason being there are three streams of studies on
human capital development. The first and second streams studies usually focus on either
component of the human capital and growth nexus, education or health and the last streams
focuses on both components.
Few of those works includes: Knowles and Owen (1997), Abbas (2001), Hamoudi and
Sachs (1999), Aka and Demount (2008), Mostafizur (2011) for other countries and Owolabi
and Okwu (2010), Lawnson (2009), Maku (2009), Chete and Adeoye (2002) for Nigeria are
some of the notable papers in this respect. In the study of the joint development of
government expenditures and economic growth in 23 OECD countries conducted by
Lamartina and Zaghini (2007) showed that there is a structural positive correlation between
public spending and per capita GDP. Thus an increase in government‘s spending on human
capital development is expected to culminate in an increase of per capita output. The impact
of an aggregation of capital and recurrent expenditures on health and education and its
outcomes has not been sufficiently addressed by researchers.
Knowles and Owen (1997) formulated a structural growth equation that incorporated
education and health as labor- augmented variables in aggregate production function and
assessed the impact of education and health on economic growth in the effective labor
empirical growth framework. They used the cross-section data collected from 77 countries
grouped in different sub-samples; they measured education and health by average years of
schooling and life expectancy at birth, respectively. Then, they applied non- linear instrument
variables (NLIV) estimating methods and their result suggests that a strong positive
relationship exists between health and economic growth while the effect of education was
found to be insignificant
Abbas (2001) empirically investigated the affect of human capital on economic growth in
Pakistan and Sri-Lanka. The production function used in the study was a standard human
capital augmented production function in which the output growth depends on labor, physical

21. 21
capital and human capital. The ordinary least square (OLS) method was applied on an annual
data series from (1970-1994). Enrolment rates at primary, secondary and higher secondary
levels were taken as a proxy for human capital in the study. Human capital was found to be
positively related with economic growth in Pakistan at 1% level of significance and at 5%
level of significance in case of Sri-Lanka at secondary and higher secondary level
respectively.
Blooms and Sachs (1998), as cited in Hamoudi and Sachs (1999), provided empirical
evidence on the relationship between health variables and economic growth rates and found
that health variables play a significant role in determining economic growth rates. They
showed this by investigating cross-country data between (1965-1990), using a basic growth
model, and they found that an increase of life expectancy by one percent accounted for an
acceleration of GDP per capita growth by over 3% per annum. In addition, health and
demographic variables explained over half of the differences in growth rates between Africa
and the rest of the world over that same period.
Mostafizur (2011) investigated the causal relationship among health expenditure,
education expenditure and GDP for Bangladesh. With the use of time series data for the
period (1990–2009) and with the use of Augmented Solow Growth Model, he included
education expenditure and health expenditure as education and health capital. From the Error
Correction Model (ECM) methodology he found out that an inclusion of health and education
expenditure as an investment in health and education capital improve the significance of the
coefficient of human and physical capital in the growth model for Bangladesh. Secondly, he
found out that the causal relationship among these variables by vector auto regressive (VAR)
Granger-Causality test. From the study he found out the existence of bi-directional causality
from education expenditure to GDP and also from education expenditure to health
expenditure and only unidirectional causality is obtained from health expenditure to GDP.
Aka and Demount (2008) examines the causal relationships between human capital
(education, and health) and economic growth for the USA using time series approach for the
period (1929-1997). They find out cointegration between the variables under study. The
ECM-VAR investigations show bi-directional causality between education and health.
Causality also is shown from education to economic growth, but not the reverse. On the other
hand, causality is found between health and economic growth and not the reverse. They went

22. 22
ahead to perform variance decomposition and impulse response functions to see the
importance of the impacts among these variables. The results show that the long-run dynamics
of growth are slightly explained by past health and education level, and the health level
account for 10% of the evolution of education in the long run.
Nabila, Asma and Hafeez (2012) investigate the role of human capital in terms of
education and health on economic growth of Pakistan using annual data, from (1974-2009),
ADF, PP and Ng-Perron tests are utilized to check the stochastic properties of the variables.
Long-run relationship among variables is confirmed through Johansen and Juselius
cointegration test whereas the long-run and short-run dynamics are observed by VECM
specification. For causality purpose both VECM based causality and Toda-Yamamoto
causality tests are employed. Stability of the model is confirmed through CUSUM and
CUSUMSQ. The results indicate strong positive impact of human capital on economic growth
despite the fact that Pakistan has been spending less percentage of GDP on education and
health facilities to create human capital. The study recommended that in order to reap
maximum benefits from human capital there is a need to formulate and implement effective
economic policies related to the provision of education and health facilities to the people.
Chete and Adeoye (2002) investigated the empirical mechanics through which human
capital influences economic growth in Nigeria. They attempted to achieve this objective using
VAR analysis and OLS to capture the influences. They, however, concluded that there is an
unanticipated positive impact of human capital on growth, and effort of various Nigeria
governments since the post independence have appreciated by prodigious expansion of
educational infrastructure across the country; but they are quick to point out that the real
capital expenditure on education and health have been rather low.
Uwatt (2002) empirically examined the impact of human capital on economic growth,
from (1960-2000) using five variant of original Solow Model linking physical capital, labour
and human capital proxied by total enrolment in educational system to real Gross Domestic
Product. The result showed that physical capital exerted a positive and very statistical impact
on economic growth. Its coefficient was statistically different from zero at 5% significant
level, labor force had positive but statistically insignificant on economic growth. On human
capital variable, it was human capital from primary school education that was statistically

23. 23
very significant on the growth of Nigeria economy, while in the case of tertiary education the
result failed totally with priori expectation.
Babatunde and Adefabi (2005) investigated the long run relationship between education
and economic growth in Nigeria between (1970-2003) through the application of Johansen
cointegration the result discovered a long run relationship between human capital
development (proxied by schools‘ enrolments in primary and tertiary institutions and average
years of schooling) and economic growth measured by output per worker. Their result showed
that education has a statistically significant positive relationship with economic growth.
However, they did not give consideration to government health expenditure as a human
capital component in the model specified and estimated.
Adenuga (2006) examine the relationship between economic growth and human capital
development using Nigerian data from (1970-2003). They applied cointegration theory
incorporating the ECM and found that investment in human capital, through the availability of
infrastructural requirements in the education sector accelerates economic growth. The work
then concludes that there can be no significant economic growth in any economy without
adequate human capital development. However, in Nigeria, focus was on accumulation of
physical capital for growth and development without adequate attention to the important role
played by human capital in the development process.
Maku (2009) examine the relationship between total government spending and economic
growth in Nigeria over 30 years (1977-2006). He regressed real GDP on private investment,
human capital investment, government investment and consumption spending. His result
shows that human capital investment as a share of real output has positive but statistically
insignificant effect on the growth rate of real GDP. He concluded that government
expenditure had no significant influence on economic growth in Nigeria. Based on his
analysis, it is reveals that the variables have not maintained a uniform pattern in the period of
study owing to persistent random shock effects on the time series. From his report the rate of
government expenditure to real GDP has been rising since the Structural Adjustment
Programme (SAP) without significant contribution to economic growth in Nigeria. This he
attributed to lack of government monitoring of the contract awarding process of capital
projects, ineffective deployment of government funds to productive activities, and lack of
transparency and accountability by the government on government spending. However, it is

24. 24
our opinion that if the study had used expenditure relating to human capital development (say,
expenditure on education and health) he might as well obtain a different result.
Owolabi and Okwu (2010) investigated the role of human resource development in
economic growth in Nigeria from (1983-2007). The study employed quantitative analysis
approach. The variables considered were government expenditures on education and health,
primary education enrolment rate, secondary education enrolment rate, tertiary education
enrolment rate and gross domestic product. The major tool of analysis is a multiple regression
analysis model (MRS). Were they treated gross domestic product as the explained variable
and the others as the explanatory variables, The model was estimated via OLS techniques,
The result showed that only secondary and tertiary education enrolment rates exerted
statistically significant effect on economic growth in Nigeria. The others exerted positive but
insignificant effect on economic growth. However, the explanatory variables jointly exerted
significant effect on growth. No outcomes of heath expenditure were included in their study
like (infant mortality and life expectancy).
In a similar study by Oluwatobi and Ogunrinola (2011) they examine the relationship
between human capital development and economic growth in Nigeria, from (1970-2008), the
augmented Solow model was also adopted. The dependent variable in the model is the level of
real output while the explanatory variables are government capital and recurrent expenditures
on education and health, gross fixed capital formation and the labour force. It seeks to find out
the impact of government recurrent and capital expenditures on education and health in
Nigeria and their effect on economic growth. The data used for the study are from secondary
sources while The result shows that there exists a positive relationship between government
recurrent expenditure on human capital development and the level of real output, while capital
expenditure is negatively related to the level of real output. The study recommends
appropriate channelling of the nation‘s capital expenditure on education and health to promote
economic growth. Yet no outcome of health indicator were considered in this study
2.5 LIMITATIONS OF PREVIOUS STUDIES
After reviewing empirical literature on the subject matter, it is evident that in case of cross
country studies empirical results remained inconclusive whereas in a single country analysis
most studies supports positive association between human capital and economic growth. Thus

25. 25
literature has proved overtime that there is the possibility that the relationship that existed in
the theory may not be replicated in real economy activities given the presence of some factors,
which may not be clearly identified in the theory Ajisafe et al. (2006). The divergence of
opinion in the literatures on human capital development emanated from various streams of
human capital nexus used by different scholars, as these seems to suggest that the study has
become an important empirical debate among researchers and policy makers.
Moreover the choice in the use of different variables to capture human capital, differences
in locations (regions where studies are undertaken) and heterogeneities among countries and
the inaccuracy of data contributed to differences in results. Sometimes, understanding the role
of education and health by collapsing developed and developing countries in the same sample
at a time may not be informative since growth processes and determinants in these extreme
worlds may not necessarily be the same. Thus, there is a need to treat developing world
separately.
Until recently, investment in education was seen as the only means of increasing human
resource for better economic performance. Little or no attention was paid to health; but there
is no doubt that health as a component of human capital is very essential for growth and
development. So most of the empirical research conducted on the subject matter on Nigeria
economy has defined human capital in terms of education indicators or in terms of health
indicators. These indicators alone fail to capture development and skills of the labor force;
therefore, there is a need to conduct research on this aspect that uses much broader measure of
human capital in the context of Nigeria economy. The present study is an attempt to use
broader measure of human capital as it uses education index and health index as proxies for
human capital.
This work is designed to analyze government expenditure on human capital development
and economic growth in Nigeria and also ascertain the variation of expenditure on human
capital development between civilian and democratic regimes in Nigeria. This study is
therefore carried out to fill some of these gaps identified above, as government expenditure on
human capital development (education and health) on economic growth related issues on
Nigeria are scarce to come by as health which is one of such variables which is important in
explaining growth but usually, and mistakenly ignored by growth accountants and some
scholars, will be included in this work.

26. 26
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 ANALYTICAL FRAMEWORK
The specification of the relationship between human capital and growth is well grounded
in economic theory. One of such is augmented Solow human capital growth model. The
model is an improvement on the original growth model. Solow original model did not
explicitly incorporate human capital. In order to do that, Mankiw, Romer and Weil (1992)
came up with the Augmented Solow Model. The justification for inclusion of human capital in
the model is the fact of non-homogeneity of labour in the production process either within a
nation or across different economies due to their possession of different levels of education
and skill.
This modification facilitates the suitability and hence, the adoption of this model for this
works in the Nigerian context. Following Mankiw, Romer and Weil (1992) and Olaniyan and
Okemakinde (2008). The basic assumption in this model is that increase in workers quality
through improved education and health, improve output and ensures greater productivity.
Thus the Augmented Solow Model is therefore specified as follows;
Y= AK
α
(hL)
β
----------------------------------------------------------- (1)
where
Y = Output level
K = Stock of physical capital
h = Level of human capital
L = Labor, measured by number of workers
A = Level of total factor productivity
α
= Elasticity of capital input with respect to output
β
= Elasticity of labour input with respect to output
3.2 ECONOMETRIC SPECIFICATION
The augmented Solow model can be specified in an econometric form as follows:
Y= AK
α
(hL)
β
U ----------------------------------------------------- (2)

27. 27
where the variable remain as defined in equation (1) above,
U is the error term which is assumed to iid
We further transform equation (2) into a log-linear form, and it becomes
Log Y = α0+α1logK+ βlog hL+V-------------------------------------- (3)
where α0 = logA
V = log U
In order to make equation (3) more relevant to this work and more suitable to the
Nigerian situation, we modify the model to accommodate other variables. These variables
include government capital expenditure on education and health (CE) and recurrent
expenditure on education and health (RE). These two variables are incorporated to capture
government expenditure on human capital development, since this study is focused on
government investment in human capital development and its effect on economic growth.
When we incorporate these new variables in equation (3) the expanded form becomes
LogY = α0 + αIlogK + βloghH + α2logRE + α3logCE + V----------------------------(4)
where
LogY = which is output level proxied as log of real gross domestic product
(RGDP);
Log K = stock of physical capital formation proxied as gross fixed capital formation
(GFCF);
Log hL = total stock of human capital proxied as a product of total school enrolment
(TSE);
Human capital development is proxied by government capital and recurrent expenditure on
education and health that is CE and RE.
Based on the above formation, the model can be written as
RGDP = α0 + α1GFCF + α2TSE + α3RE + α4CE + V------------------------------- (5)
The a priori expectations are
α0, α1, α2, α3, α4 > o
Equation (5) shall be estimated using (OLS)

28. 28
3.2.1 Model two
Following the work of Craigwell, Lowe and Bynoe (2012), this study will adopt their
model with modifications. Hence we introduce new variables in the model in order to suit our
objective. The relationship between government expenditure and human capital development
outcomes can be specified in the following equations.
The health regressions are modeled as follows:
HE = α0 + α1X1 + α2Z2 + α3Y3 + Ut ---------------------------------------- (1a)
where
HE = health, proxied by life expectancy
X1 = is a vector of investment comprising of recurrent expenditure on health as a percentage
of total government expenditure;
Z2 = is a vector of investment comprising of capital expenditure on health as a percentage
of total government expenditure;
Y3 = is a vector of infant mortality rate
Ut = white noise
The education regressions are modeled as follows:
EEj = 0 + 1X1 + 2Z2 + 3Y3 + Ut------------------------------------------------ (1b)
where
EEj = Education, proxied by total school enrollment for primary, secondary and tertiary
gross school enrollment
X1 = is a vector of investment comprising of recurrent expenditure on education as a
percentage of total government expenditure;
Z2 = is a vector of investment comprising of capital expenditure on education as a
percentage of total government expenditure;
Y3 = is a quality variable proxied by literacy rate
Ut = white noise
3.2.2 Model Three
To capture the third objective we introduce a dummy variable to capture the variable
administration/ regime in the country during the period of study.
H = π0 + π1MIL + µ ………………………. (8)

29. 29
Where H = human capital development expenditure in Nigeria comprising of capital and
recurrent expenditure on education and health.
MIL = military administration regime.
µ = the random term, the base group here is civilian administration, π1 is a dummy
variable which assume one (1) if human capital expenditure is during military regime
and zero (0) otherwise.
3.3 MODEL ESTIMATION TECHNIQUES
The first model will be used to capture the first objective; the second model for the second
objective while the third objective is for the last model. Hence the following techniques shall
be employed in the research work for various tests.
In order to strengthen our analysis and findings, we apply a statistical tool of
econometrics based on OLS. We will carry out a unit root test, to test the order of stationarity
of the data set and see if there is a long equilibrium between the variables of interest. After
conducting the unit root test, we shall be able to identify the order of integration of the
variables, if any of the explanatory variables have the same order of integration with the
dependent variable then we may suspect that they are co-integrated and their linear
combinations at their original form without the constant term and save the residual.
3.4 DATA SOURCES AND COLLECTION
The success of any econometric analysis ultimately depends at large on the availability of
appropriate data. However the researcher should always keep in mind that the results of any
research are only good as the quality of the data (Gujarati, 2007). The data will be source from
secondary sources like; World Bank Development Indicators (WDI), National Bureau of
Statistics publication (NBS) and the Central Bank of Nigeria statistical bulletin (CBN).
3.5 SOFTWARE PACKAGE
The study will make use of E-view version 4.0 econometric software; while ms-excel will
be use for data computation.

30. 30
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TABLE OF CONTENT
CHAPTER ONE
1.0 INTRODUCTION/BACKGROUND OF STUDY------------------------------------------------------------------ 1
1.2 STATEMENT OF PROBLEM------------------------------------------------------------------------------------------- 3
1.3 OBJECTIVE OF STUDY-------------------------------------------------------------------------------------------------- 5
1.4 STATEMENT OF PROBLEM--------------------------------------------------------------------------------------------- 6
1.5 SIGNIFICANT OF PROBLEM-------------------------------------------------------------------------------------------- 6
1.6 SCOPE OF STUDY---------------------------------------------------------------------------------------------------------- 6
CHAPTER TWO
2.0 LITERETURE REVCIEW/CONCEPTUAL FRAMEWORKS------------------------------------------------------- 7
2.2 THEORETICAL LITERATURE REVIEW------------------------------------------------------------------------------ 8
2.2.1 THE THEORIES ON INCREASING PUBLIC EXPENDITURE--------------------------------------------------- 8
2.2.1.1 KEYNESIAN AND CLASSICAL VIEW----------------------------------------------------------------------------- 8
2.2.1.2 WAGNER AND WISEMAN-PEACOCK THEORY---------------------------------------------------------------- 9
2.2.2 EXOGENOUS AND ENDOGENOUS THEORIES ON HUMAN CAPITAL----------------------------------- 9
2.2.2.1 THE TRADITIONAL NEOCLASSICAL GROWTH THEORY (EXOGENOUS) ------------------------------9
2.2.2.2 NEW GROWTH THEORY------------------------------------------------------------------------------------------------10
2.3 THEORITCAL LITERETURE------------------------------------------------------------------------------------------------12
2.3.1 THE CONCEPT OF HUMAN CAPITAL---------------------------------------------------------------------------------12
2.3.2 HUMAN CAPITAL DEVELOPMENT IN NIGERIA ------------------------------------------------------------------13
2.3.3 PROFILE OF FEDERAL GOVERNMENT EXPENDITURES ON EDUCATION AND HEALTH SECTORS IN
NIGERIA -----------------------------------------------------------------------------------------------------------------------------14
2.3.4 THE ROLE OF EDUCATION AS COMPONENT OF HUMAN CAPITAL-----------------------------------------15
2.3.5 THE ROLE OF HEALTH AS A COMPONENT OF HUMAN CAPITAL-------------------------------------------17
2.4 EMPIRICAL LITERATURE---------------------------------------------------------------------------------------------------19
2.5 LIMITATIONS OF PREVIOUS STUDIES ---------------------------------------------------------------------------------23
CHAPTER THREE
3.1 RESEARCH METHODOLOGY/ANALYTICAL FRAMEWORK----------------------------------------------------- 25
3.2 ECONOMETRIC SPECIFICATION------------------------------------------------------------------------------------------25
3.2.1MODEL TWO--------------------------------------------------------------------------------------------------------------------27
3.2.2 MODEL THREE----------------------------------------------------------------------------------------------------------------27
3.3 MODEL ESTIMATION TECHNIQUES--------------------------------------------------------------------------------------28
3.4 DATA SOURCES AND COLLECTION--------------------------------------------------------------------------------------28
3.5 SOFTWARE PACKAGE---------------------------------------------------------------------------------------------------------28