Explain the main sources of human capital formation.
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The main sources of human capital formation are:
- Investment in education: People invest in education with the objective of increasing their future income.
- Investment in health: It is also treated as an important input for the development of an individual, and for the nation's development at large. Healthy people of a nation contribute more productively, so investment in health is a major source of human capital formation.
- 'On-the-job training': This source may take different forms:
- The workers may be trained by the given firm under the supervision of a skilled expert.
- The workers may be sent for off-campus training. Expenditure incurred on this source is a source of human capital formation, as this expenditure, enhances the labour productivity manifold.
- Migration: expenditure on migration is a source of human capital formation because people migrate in search of better job opportunities. Ruralurban migration in India is mainly on account of unemployment.
- People incur expenditure to collect information about the labour market along with the other markets. This information is vital for taking right decisions w.r.t investment in human capital and for efficient and best utilisation of the acquired human capital stock.
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