What factors contribute to human capital formation?
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There are various factors which contribute to human capital formation as discussed below:
- Education: An educated individual has more knowledge and skills than an uneducated person. Hence, education imparts the necessary attitude and aptitude for adopting new technologies and efficient management practices which help in raising productivity. Education is an important factor in human capital formation which leads to higher efficiency and productivity in human beings and thus higher income and standard of living which again facilitates further investment in education and health.
- Health: A sound mind in a sound body like education, investment in health is also considered as an important factor for human capital formation as it directly increases the supply of healthy labour force. A healthy person is an asset for the nation as he is more productive than a sick person who is unable to work efficiently due to bad health. Therefore, investment in health facilities to build a physically as well as mentally strong human capital, is essential for increasing productivity. Preventive medicine (vaccination), curative medicine (medical intervention during illness), social medicine (spread of health literacy) and provision of clean drinking water and good sanitation are the various forms of health expenditures. Health expenditure thus, a source of human capital formation.
- On the Job Training: Firms provide on-the-job training to their workers to enhance their skills which helps in human capital formation. The workers may be trained in the firm itself under the supervision of a skilled worker or the workers may be sent for off-campus training, Expenditure regarding on-the job training is an important factor of human capital formation as the return of such expenditure in the form of enhanced labour productivity is more than the cost involved.
- Migration: It contributes to human capital formation as it facilitates utilisation of inactive skills of the people. People from rural areas, migrate to urban areas in search of employment. Technically qualified persons, like engineers and doctors, migrate to other countries because of higher earnings in such countries. Migration in both these cases involves cost of transport, higher cost of living in the migrated places and psychological costs of adapting to a new socio-cultural setup The Increase in earnings in the new place outweighs the costs of migration. Hence, expenditure on migration is also a lacier of human capital formation.
- Information: Information relating to the labour market and other markets is also a factor which contributes to human capital formation. Information regarding the level of salaries in various types of jobs, whether the educational institutions provide the required skills and at what is the associated cost is necessary to make decisions regarding investments in human capital as well as for efficient utilization of the acquired human capital stock Information is necessary 10 make decisions regarding investments in human capital.
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Similar Questions
- 1View SolutionExplain how investment in education stimulates economic growth.
- 2View SolutionEstablish the need for acquiring information relating to health and education expenditure for the effective utilisation of human resources.
- 3View SolutionBring out the need for on-the-job-training for a person.
- 4View SolutionRead the passage given below and answer the following questions from 1 to 5.
Traditional economic theory viewed capital in physical terms only. Economists during the late 1950s based on the aggregate production function found that the standard measures of simple labour and physical capital were incapable of explaining adequately the rapid post-war growth. Speculations on what was missing were diverse. Some argued that the principal explanation lays in the lack of appropriate adjustments for improvement in the quality of physical capital and the embodiment of technical progress in that capital. Others suggested that the most important omission pertains to the organisational advance or a vaguely specified human capital. The residual of unexplained growth was at first ascribed to technology by Solow, but later, the residual was defined to include improvements in the quality of capital can the investment in human beings. Human capital is formed with improvement in skills education. Improved health and education is merit as well as a public good and is associated with a large number of externalities which are often indirect, indivisible and non-quantifiable.- Which of the following gives the definition of public goods?
- Excludable and non rivalrous in nature
- Non-excludable and non-rivalrous in nature
- Non-excludable and rivalrous in nature
- Excludable and rivalrous in nature
- Consider the situation of 2 countries – A and B. Country A has invested more towards the technological progress whereas Country B has invested more towards expanding its military network and arms. To Solow, which country would go faster?
- Country A
- Country B
- Both grows and the same pace
- Can’t comment
- Standard economic theories failed to explain the post war rapid growth due to?
- Measuring growth in terms of physical inputs only
- Ignoring other important factors such as improved skills and education
- Both (a) and (b)
- None of the above
- An externality is the good or bad impact which enters the utility or production function of another individual or firm with no choice of their own. The given statement is?
- True
- False
- Partially True
- Partially False
- In the context of the above paragraph, the ‘residual’ factor include.
- Improvement in the quality of human capital
- Investment in human beings
- Improvement in technology
- All of the above
- 5View SolutionEducation is considered to be an important input for the development of a nation. How?
- 6View SolutionTrace the relationship between human capital and economic growth.
- 7View SolutionExplain various sources of human capital formation.
- 8View SolutionHow does investment in human capital contribute to growth?
- 9View Solution"As physical capital is essential for economic development so is human capital." Explain.
- 10View SolutionWhat are the differences between human capital and human development?OR
Bring out the differences between human capital and human development.