Abstract:
productivity promotion has received a key attention in contemporary macroeconomic analysis. Productivity of labor driven, in particular, by human capital (i.e. health and education), is seen vitally more important. Labor qualities in terms of health and education (treated as flow and stock variables), have a bearing on labor productivity. The main objective of this paper is to identify the influence on productivity of health and education and delineate their relative impact, using a composite approach to human capital. Towards this end, an Autoregressive-Distributed Lag (ARDL) technique was applied to measure labor productivity over the period 1974-2014. Based on the result of model findings, attempt was made to evaluate their short and long term effects. The model applied in this paper has examined the impact of two key variables i.e. per capita capital and capacity index, in addition to human capital index (health and education) influencing collectively on labor productivity. The results indicate that all variables (Excluding the index of composite Human Capital, flow) are bearing a positive and significant impact on labor productivity in the long run. The coefficient of composite human capital index (health and education, flow variables) was greater than that of composite human capital (health and education, stock variables).
Machine summary:
Naturally, improving public health as human capital can increase the efficiency and effectiveness as equal as labor productivity, therefore, investment in this area will have a strong bearing on economic efficiency.
Sustained output growth and labor productivity improvement depends on the levels of human capital whose stock increases as a result of better education, better health, and new learning and training activities.
This research aims to study the impact of human capital (health and education) on labor productivity in the economy of Iran.
Ahmadi, Naji and Jandaghi (2010) demonstrated that the average years of labor education and ratio of health expenditure to GDP had positive and significant effect on total productivity.
It deems important to examine different aspects of human capital (education and health), factors affecting the labor productivity growth.
Empirical and theoretical studies in some countries show that in spite of the key role played by human capital in productivity and growth models, the result of models is subject to some limitations, because there is no consensus on indices selection.
This paper having a wider view on human capital, and with employing a composite approach relying on the Principal Components Method (PCM), emphasizes on a comprehensive human capital index (health and education) for estimation of the per capita output growth model.
The results our models indicate that, the coefficients of all variables (except composite flow human capital) were statistically significant as expected sign in dynamic and long term models.