Role of Human Capital Formation in Economic Development:
Economic backwardness is the main feature of underdeveloped countries and the main cause for this backwardness is the problem of human capital formation. But the economic development can be achieved by human capital formation.
There are the following advantages of human capital formation in economic development :
1. Increase in the Efficiency of Labour. Economic development can be attained through an increase in the efficiency of labour. The efficiency of labour is increased through human capital formation by investing in education, health, training, etc.
2. Training and Technical Knowledge. It is necessary for the labour to be trained and educated for economic development. Thus through human capital formation, the level of education, technical knowledge, efficiency, and health of the labour can be raised, and hence the path of economic development can be achieved.
3. To Enlarge the size of the Business. The size of a business can be enlarged by efficient entrepreneurs and innovators. An entrepreneur becomes efficient by investment in human capital and this efficiency ultimately leads to economic development.
4. Increase in Production. An increase in production leads to economic development. Human capital formation produces able and efficient persons who increase production.
5. Change in the Religious, Social, Cultural, and Institutional setup. For economic development change in religious, social, cultural, and institutional setup is necessary. These changes are only possible through human capital formation.
6. To Decrease Production Cost. Reduction in the production cost is essential for economic development. Human capital formation helps to decrease the production cost.
Thus the role of human capital formation in economic development is very significant.
