HUMAN CAPITAL DEVELOPMENT AND ECONOMIC GROWTH IN RWANDA

Abstract

Rwanda’s economic growth has been dramatically increased overtime since 2000, where there have been strategies settled to encourage economic growth and shape the brighter future for economic growth as well as development of Rwanda. Human capital development has been one of the primary elements that encourage growth in different ways as it is consensus that it contributes to economic growth, therefore this study analyzes this relationship between human capital development and economic growth in Rwanda by employing time series data from 2000 to 2022 based on endogenous growth theory. The model built for Gross domestic product considered as the proxy for economic growth whereas human capital explained by school enrollment for secondary and tertiary as the proxies for education sector then life expectancy from birth is the proxy for health sector in the model. Econometrics methods employed to analyze this economic relationship where ADF test conducted to check the stationarity of variables within the model, Johnsen cointegration test and Error correction model were employed to analyze short run and long run relationship of the variables in the model and other diagnostic tests also conducted. The study findings confirm that all variables used such as gross domestic product, gross capital formulation, labor force, life expectance, school enrollment(secondary and tertiary) have become stationary at their first difference which is in good line of Johnsen test results that the variables are cointegrated, the ECM revealed by findings that short run adjustment towards long run relationship at 38% of shocks should be adjusted within the short run, also diagnostic test results confirm the reliability of the estimated parameters in the model and their economic meaning. Drawing forward, this research therefore recommends the need to continue to strength human capital as one of the centers of future drivers of growth towards 2035 targets through its main primary element of education sectors like Improve innovative skills of university-educated from leaning by doing which is a hope to encourage positive returns from labor participation, to reduce the over-schooling gender gap and improvement in labor market outcomes for upper-secondary educated workers by providing more TVET opportunities and better computer skills and encourage studying in fields which showcase higher levels of demand. For health sector the study recommends the provision of more health care and health services.