The Effect of Human Capital Investment on the Gross Domestic Product per Capita: A Regional Approach

Abstract

Developing countries typically increase spending on the social sector to promote economic growth; hence, small changes in the efficiency of human capital investment could have a major contribution to aggregate productivity growth and gross domestic product levels. The country’s spending on primary and secondary education, tertiary education, and health are expected to improve the well-being of beneficiaries and enhance their capability to earn income in the future.

The basic objective of the study is to examine the impact of public investment on education and health of seventeen (17) regions on gross domestic product per capita in the Philippines. This study had developed a linear econometric model using a panel data of public expenditures on education and health, and its effect on regional gross domestic product per capita. The results revealed that expenditure on education in all levels and health expenditure had a significant positive effect on regional economic growth; therefore, investment in human capital, namely education, and health, will increase regional income per capita in this country.

The paper recommends that government agencies, particularly the Department of Education, State Universities and Colleges, and Department of Health to continue their efforts in strengthening programs and activities, as well as allocation policy instruments, that will result in success in smoothing the growth rate of human capital. Also, continue to strengthen programs like Mental Health which is concerned with the welfare of the students.