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Factor Accumulation and Economic Growth in Pakistan: Incorporating Human Capital

Arshad, Shahzad and Munir, Kashif (2015): Factor Accumulation and Economic Growth in Pakistan: Incorporating Human Capital.

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The objective of this study is to analyze relationship between factor accumulation and economic growth in Pakistan for the time period of 1973 to 2014 using ARDL bound testing approach to cointegration. Considering human capital as a core factor of production we have constructed a series of human capital as average year of schooling and real capital stock is also generated on the basis of gross fixed capital formation. Under endogenous growth model bound testing approach to cointegration suggest that human capital stock, real physical capital stock per worker and GDP per worker are highly cointegrated. Moreover, human capital and real physical capital stock are highly significant and growth friendly. Our findings are consistent with the endogenous growth model suggesting that developing countries like Pakistan should increase share of education and health in GDP in order to accelerate economic growth.

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