The Effect of Human Capital on Economic Growth: A Time Series Analysis for Turkey

In a globalizing world economy, human capital is the main factor of intensive development for countries which carry out anticipatory investment in human capital. This organizes its advantages for these countries, by creating the best conditions for work and life. An important advantage in creating a stable environment for growth is that the country has the accumulated high-quality human capital, such as education, health, science, management and other fields. The core of human capital, of course, is human beings, but now, the main component is an educated, creative and enterprising individual, with a high level of professionalism. The human capital in the economy determines the main share of the national wealth of country. Therefore, most of all researchers believe human capital is the most valuable resource of the post-industrial society, and it is much more important than natural or accumulated wealth. In all countries, human capital defines the rate of economic development, scientific and technological progress. Accordingly, the public interest in the education and health systems increases. This paper tries to estimate the effect of human capital through education and health on economic growth. The estimation is conducted by a Cobb-Douglas production function, in which labor, human capital, and physical capital are shown as factors of production. The Cobb-Douglas production function is preferred by time series data on education, health, physical capital, labor and economic growth for the period of 1960–2011 of Turkey. The period is divided into five sub-divisions, series 1: 1960–1980, series 2: 1981–2001, series 3: 1981–2011, series 4: 2002–2011, and series 5: 1960–2011.The findings indicate a positive impact of human capital on economic growth for both health and education. In addition, health policies were much more effective in the period of 2002–2011. The policies should be continued in the health sector for a sustainable development. But in order to attain a higher level of benefits from human capital, it is necessary to implement effective economic policies related to the education expenditures.