Human Capital-Economic Growth Relationship: Finding the Most Relevant Level of Education in Pakistan
The study employed annual dataset for the period 1981-2014 to find the most relevant level of education in terms of its contribution to the economic growth of Pakistan. The study used three models assuming gross enrolment rates at primary, secondary and tertiary level as human capital and found secondary education as the most relevant level of education for economic growth. The long-run coefficients obtained through fully modified ordinary least square (FMOLS) are used to reconfirm the findings of dynamic ordinary least square (DOLS). Rolling window regression found that the human capital elasticity of aggregate output oscillated around zero in the sample period whereas CUSUM test found that the parameters of equation with secondary education as human capital are stable. It is recommended therefore that secondary education should be given preference in resource allocation to ensure long run economic growth of Pakistan.