Abstract:

The study investigates the relationship of investment in human capital towards explanation of the convergence in economic growth in Pakistan. The study employed quarterly time series data for empirical analysis covering the period from 1990Q-2014Q. The Production function approach followed by cointegration analysis has been used to test the long run relationships and adjustment process between education expenditure, health expenditure, physical capital, labour force participation rate and economic growth. The short run fluctuation from equilibrium was analyzed by the error correction model, which shows the speed of adjusting the error to achieve long run equilibrium. The long run empirical results establish positive impact of education expenditure, health expenditure, physical capital and labour force participation over economic growth in Pakistan. The result of the pair wise granger causality test is in line with that of cointegration reflecting the robustness of our empirical analysis. Key Words: Investment, Human Capital, Economic Growth, Physical Capital, Labour Force Participation Rate and Granger Causality

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