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European Journal of Scientific Research ISSN 1450-216X Vol.24 No.2 (2008), pp.157-162 © EuroJournals Publishing, Inc. 2008 http://www.eurojournals.com/ejsr.htm

Human Capital Theory: Implications for Educational Development
Olaniyan. D.A Department of Educational Management University of Ibadan, Ibadan Okemakinde. T Department of Educational Management University of Ibadan, Ibadan AbstractThe belief that education is an engine of growth rests on the quality and quantity of education in any country. The paper posits that formal education is highly instrumental and even necessary to improve the production capacity of a nation and discusses the rationality behind investment in human capital. Empirical evidences of human capital model were identified and findings reveal that investmentin education has positive correlation with economic growth and development. Criteria for the applicability and problems associated with the theory were identified and implications for educational development highlighted. Conclusively, the paper recommends that for education to contribute significantly to economic growth and development, it must be of high quality to meet the skill-demand needs ofthe economy.

Introduction
Education is an economic good because it is not easily obtainable and thus needs to be apportioned. Economists regard education as both consumer and capital good because it offers utility to a consumer and also serves as an input into the production of other goods and services. As a capital good, education can be used to develop the human resources necessary foreconomic and social transformation. The focus on education as a capital good relates to the concept of human capital, which emphasizes that the development of skills is an important factor in production activities. It is widely accepted that education creates improved citizens and helps to upgrade the general standard of living in a society. Therefore, positive social change is likely to beassociated with the production of qualitative citizenry. This increasing faith in education as an agent of change in many developing countries, including Nigeria, has led to a heavy investment in it. The pressure for higher education in many developing countries has undoubtedly been helped by public perception of financial reward from pursuing such education. Generally, this goes with the belief thatexpanding education promotes economic growth. However, the paradox accompanying this belief is that, despite the huge investment on education, there is little evidence of growth-promoting externalities of education in Nigeria.

Human Capital Theory: Implications for Educational Development

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Concept of Human Capital Theory
The economic prosperity and functioning of a nation depend on itsphysical and human capital stock. Whereas the former has traditionally been the focus of economic research, factors affecting the enhancement of human skills and talent are increasingly figuring in the research of social and behavioural sciences. In general terms, human capital represents the investment people make in themselves that enhance their economic productivity. The theoretical frameworkmost responsible for the wholesome adoption of education and development policies has come to be known as human capital theory. Based upon the work of Schultz (1971), Sakamota and Powers (1995), Psacharopoulos and Woodhall (1997), human capital theory rests on the assumption that formal education is highly instrumental and even necessary to improve the production capacity of a population. Inshort, the human capital theorists argue that an educated population is a productive population. Human capital theory emphasizes how education increases the productivity and efficiency of workers by increasing the level of cognitive stock of economically productive human capability which is a product of innate abilities and investment in human beings. The provision of formal education is seen as a...
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