Human capital and economic growth in South Africa: A cross-municipality panel data analysis

Abstract

Background:In the literature, human capital has been identified as a key economic variable that is needed to promote growth; hence this study explores the components of human capital, that is, different skill levels in order to capture the real effect of the employed labour on economic output across the municipalities of South Africa.Aim: This study investigates the effect of human capital of employed labour on economic output and growth in South Africa.Setting: The study focuses on the balanced panel of 269 South African municipalities for the period 1993 to 2016.Methods: The study utilises panel causality test and the generalised method of moments estimation techniques.Results: A panel causality test confirms bidirectional causality between human capital and total output, as well as between total employment and total output. The resultant aggregate findings suggest that human capital has a positive and a significant impact both on total output and economic growth. The disaggregated proxy of human capital shows that higher levels of skilled employment is associated with higher total output and economic growth.Conclusion: The findings of the effect of skilled employment on economic growth are in line with theoretical literature and therefore the study concludes that human capital in the form of skilled labour has a positive effect on both economic output and growth in South Africa. This informs policy to prioritise the upskilling of the labour force in order to contribute positively towards value-generating economic activities in South Africa.

Early human capital: the driving force to economic growth in island economies

“…Abel et al (2019) adopt the error correction model for Zimbabwe from 1980 to 2015 and show that, human capital measured by government expenditure on health has a statistically significant and positive short run and long run effects on economic growth while government expenditure on education is negative. Ngepah et al (2021) explore the effects of human capital of employed labour on South African economic growth using data on 269 municipalities from 1993 to 2016. Applying the GMM estimation technique, the findings indicate that human capital measured by skilled employment leads to higher growth.…”

Growth Effect of Migrant Remittances and Human Capital: Panel Evidence from Sub-Saharan African Countries

“…Mudassaar (2019) showed that human capital positively affects growth using a disaggregated sample of developing and developed countries in East, West, and South Asia. Ngepah et al, (2021) employing the GMM technique concluded that human capital facilitates growth in South Africca. Bawono (2021) also showed that human capital drives growth in Indonesia for the period 1984-2019 using autoregressive distributed lag (ARDL) method approach.…”

“…Aside migrant remittances being a driver of growth, human capital has also been identified as a key factor in attaining growth (Pelinescu, 2015;Kartal et al, 2017;Ngepah et al, 2021). Empirical studies have affirmed that human capital helps to develop an economy via expansion of skills and knowledge of its citizen.…”

The Human Capital Risk Reporting of Listed South African Companies: Exploring a Reporting Framework to Support Corporate Governance

“…The vitality of HC plays a central role in the competitiveness and success of organizations and countries (Flair 2022). Consequently, the economic growth and organizational outcomes of South African companies have also been significantly linked to HC (Ngepah et al 2021). Management and analysis of risks to this vital resource is thus imperative and seen as one of the most important conditions for maintaining company performance (Necula and Micu 2021).…”