Investment in Human Capital and Economic Growth in Jammu and Kashmir: Using a Granger Casuality Approach

The study is an empirical investigation of the long-run relationships and the causal links between human capital investment and economic growth in Jammu and Kashmir using the granger causality test on the annual data for the time period 1975-76 to 2011-12. Government expenditure both on education and health are included as proxy variables for human capital investment and state per-capita domestic product as proxy variable for economic growth. The study highlights that in case of expenditure on health and per-capita domestic product their exists bivariate causality while in case of expenditure on education causality runs from expenditure on education to per-capita state domestic product. The findings revealed that increasing expenditures on health and education will improve the state domestic product figures in the long run. The analysis suggested when income of population increases then there would be a definite desire to educate the children. The study recommends that substantial amount of government budgetary allocation should be directed towards the educational and health sector. It is better to provide the citizen with substantial amount of education with good health which in turn will improve their ca[ability to command more goods and services. The study has limitation of including the limited variables in the model and applying the limited methodology.