Impact of Human and Physical Capital on Economic Growth: An Empirical Study for Tanzania with Causal link Analysis

Nicodemo, Elinzuu (2018) Impact of Human and Physical Capital on Economic Growth: An Empirical Study for Tanzania with Causal link Analysis. Masters thesis, The Open University of Tanzania.

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Abstract

The aim of the study is to empirically investigate the effect of human capital and physical capital on economic growth of Tanzania for the period of 1990-2015. The study aims at empirically test the relevance of the Solow Growth Model (1957) and Augmented Solow Growth Model. This study employed Ordinary Least Square (OLS) techniques and annual time series data across the years 1990-2015 to shed some intuitive light on evaluating influence of the key drivers of economic growth by using unrestricted Cobb-Douglas Production Function. The study findings show that the measures of responsiveness of GDP with respect to infinitesimal changes in physical capital stock and labour force have turned out to be in line with Cobb and Douglas (1928) findings in terms of theoretical signs; however, there is disparity in the magnitudes of coefficients. Two types of models were estimated. In this report, the Basic Solow Model turned out to be partially relevant to the Tanzania’s economy context, the Augmented Solow Model was also partially acquiescent with prescriptions by Mankiw et al. (1992). The study also performed Granger Causality analysis to determine variables causal links. The results show that there are no clear causal links between the three variables: GDP, GFCF and LABOUR FORCE. However, the results suggest further that there is unidirectional causation that runs from capital per labour to GDP per capita; this implies that increase in the physical capital per unit of skilled labour leads to increased economic growth. In view of the foregoing findings, the results suggest that the country under study need to optimally allocate national resources to the drivers of economic growth and devising consistent human resource policies, investment policies and population policies that are in particular targeting to accelerate GDP growth.

Item Type: Thesis (Masters)
Subjects: 300 Social Sciences > 330 Economics
Divisions: Faculty of Arts and Social Sciences > Department of Economics
Depositing User: Mr. Administrator OUT
Date Deposited: 22 Nov 2019 11:48
Last Modified: 22 Nov 2019 11:48
URI: http://repository.out.ac.tz/id/eprint/2328

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