The role of human capital in the economic development of countries

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The role of human capital in the economic development of countries

Ismayilova L.H.

Abstract

The article considers the role of human capital and its content in the economic development of several countries of the world at the present stage. The study analyzes the theoretical aspects of the formation of the concept of human capital, offers the points of view and definitions of economists involved in the theory of human capital and its selection as an independent direction of world economic thought. In particular, issues that contribute to the development of human capital are studied, data are proposed and analyzed based on reports from the World Bank, a number of other world monitoring groups, characterizing certain variables in this area. The article examines the rating of the Human Capital Index, a combined indicator used by the Human Capital Project and assessing the level of its development in countries and regions of the world.

Keywords: human capital, skills, economic growth, economic development.

Роль человеческого капитала в экономическом развитии стран

Аннотация

human capital economic

Исмаилова Л.Г.

Аннотация: в статье рассмотрена роль человеческого капитала и его содержание в экономическом развитии ряда стран мира на современном этапе. В исследовании анализируются теоретические аспекты формирования понятия человеческий капитал, предлагаются точки зрения и определения ученых-экономистов, занимавшихся теорией человеческого капитала и ее выделением в качестве самостоятельного направления мировой экономической мысли. В частности, исследуются вопросы, содействующие развитию человеческого капитала, предлагаются и анализируются данные на основе докладов Всемирного банка, ряда других мировых мониторинговых групп, характеризующие определенные переменные в данной области. В статье исследуется рейтинг Индекса человеческого капитала (Human Capital Index) --комбинированного показателя, используемого в рамках Проекта о развитии человеческого капитала (Human Capital Project) и оценивающего уровень его развития в странах и регионах мира.

Ключевые слова: человеческий капитал, навыки, экономический рост, экономическое развитие.

The modem concept of human capital is based on historical background, patterns of origin and development that have passed a long historical path. The beginnings of such a concept as human capital can be found in the ancient Greek chronicles of the thinkers of that time, who thought about building a free society, where each person, personality is a unique phenomenon, is of particular value.

It is an indisputable fact that no matter how perfect the production resources, the amount of financing and the level of innovation is, the low level of human capital will never allow to achieve an increase in economic development and social efficiency.

Since ancient times, the best minds of mankind have sought to characterize human strength, intellect, creativity, they have tried to analyze and evaluate the qualities and properties of an individual, his productive contribution to the development of society.

In many studies of the founders of economic theories, one can find mention of human capital, the initial definition of the concept of human capital can be found in W. Petty's book "Political Arithmetic". There are judgments about human capital in the studies of A. Smith, A. Marshall, D. Ricardo, K. Marx, J. Mill, L. Walras, J. M. Clark, F. List, G. D. Macleod, J. Mack-Kulloch and several others [1].

Prominent American economists Paul A. Samuelson and William D. Nordahus in their textbook "Economics" characterized human capital as "... a reserve of technical knowledge and skills accumulated in the workforce at the expense of capital invested in education and training" [2].

At the same time, N. Gregory Mankiw, a professor at Harvard University, in his book Fundamentals of Economics, gave the following description of human capital: "... an investment in a person, in the formation of knowledge gained in the process of learning and work." [3].

In economic theory, the concept of human capital usually refers to the knowledge, abilities, skills that any person possesses and which he can use everywhere. The very concept of human capital suggests that it is determined by the personality of a person, is a source of future income or satisfaction.

A special contribution to the formation of the theory of human capital and its selection as an independent direction of world economic thought was made by T. Schultz and G. Becker, who in their works in 1963-1964 first substantiated the concept of human capital in its current understanding.

A lot of well-known American and English economists B. Weisbrod, J. Mintzer, L. Thurow, W. Bowen, M. Fisher, J. Weisy, M. Blaug, S. Bowles, I. Ben-Poegrt, M. Woodhall, E. Denison, S. Daisy, J. Kendrick.

The founders of the concept of human capital G. Becker and T. Schultz, in their works, mainly studied investments in human capital, and assessed the level of effectiveness of these investments. They believed that investing in labor converts this resource into capital, leads to an increase in labor productivity, income, wages, while reproduction and accumulation of profits occur with the help of additionally obtained human abilities, which turns them into a new form of capital [4].

Investing in human capital means investing in education, training, and human health. Education and training in the workplace increase the amount of human capital, health protection extends its “life”, mobility and the ability to search for information in the labor market increase the price of its services, the birth and upbringing of children reproduce it in the next generation. The real meaning of investing in human capital implies the cost of obtaining a decent education, training in working professions, leading to the formation of new knowledge, the acquisition of new skills and abilities.

An analysis of the processes taking place in the world shows that human capital, its proper development and use, promoting the cyclical nature of its growth are the main factors in the increase in innovative waves of development and the cyclical development of the world economy and society as a whole. The economic development of the country is closely connected with the development of human capital.

Revolutionary changes in the economy and society, the largest innovations were carried out based on accumulated human capital in each historical period in the development of a people, country, civilization.

Human society gradually accumulated knowledge. Education and science developed on their basis. A layer of highly professional scientific, technical, managerial and, in general, intellectual elite was formed, under whose leadership another breakthrough was made in the development of mankind.

As usual, the growth of human capital is understood as an increase in its value, while the development of human capital means an increase in its quality.

The new concept of "human capital" has become important for the modern economy, when the boundaries between the non-productive sphere, where human capital is accumulated, and the industrial one, in which a person realizes his abilities, are blurred. Also, this category allowed us to take a different look at the phenomena of the labor market and explain many economic phenomena from the behavior of individuals.

Public goods such as health care, education, the recreational sector can no longer be underestimated. After all, it turned out that investments in these spheres of society will certainly have an impact on all other investments, and thus are a production necessity.

The analytical group of the World Economic Forum (WEF), in cooperation with Harvard University (Harvard University) and the international consulting company Mercer Human Resource Consulting, researches and publishes the ranking of countries in the Human Capital Development Index (The Human Capital Index). Each country was scored on a scale from 0 (worst) to 100 (best) across four thematic dimensions and five different age groups. The index aims to provide a holistic assessment of a country's human capital, both current and expected.

The Human Capital Development Index in the countries of the world was compiled for the first time and covered 174 countries. It uses a combination of data from publicly available sources and information from international organizations and development experts. The latest up-to-date version of the study sums up the results for 2020.

The Human Capital Project was developed by economists N. Angrist, S. Dyankov, P.K. Goldberg and G. Patrinos in the study “Measuring Human Capital using Global Learning Data” [5].

This study analyzes the Human Capital Index, a composite indicator used by the Human Capital Project that assesses the level of human capital development in countries and regions of the world. This study is being conducted by the World Bank Group.

The above index can be used by countries to analyze and solve socio-economic policy problems and assess the possibility of moving towards a sustainable development model based on the development of human capital.

As stated in the project description, human capital consists of the store of knowledge, skills, abilities, as well as the level of health that people acquire and implement as active members of society throughout their lives.

Human capital, in conjunction with physical capital, is the primary factor in socioeconomic progress and the driver of long-term economic growth. This, in turn, makes it necessary to invest in people, through quality health care, education, skills and jobs.

The human capital index provides an opportunity to get an idea of the level of development of human capital in each country based on a single general indicator, characterizes the level of development of human capital of the next generation, which is defined as the amount of human capital of a child born in a particular country, which he can accumulate by his adulthood, adjusted for the risk associated with the inadequate quality of health care and the level of education in the country.

The index includes such components as:

Survival (measured by mortality data for children under 5 years of age).

Expected years of schooling adjusted for learning outcomes (information on the amount of education a child can expect to receive by age 18, combined with data on the quality of education based on country performance in international student achievement tests).

State of health. To assess the health situation of the country's inhabitants, the component uses two indicators: 1) the prevalence of short stature among children under the age of 5 (reflects the health status of a child of primary preschool age); 2) adult survival rate, defined as the proportion of 15-year-olds who live to their 60th birthday (used as a measure of the health status that a child born today may have as an adult).

These three dimensions are shown as numeric values from 0 to 1, the geometric mean of which is the cumulative score of the Index, the reference value of the Index for a country in which a child born today can expect good health and a full course of education would be 1. Accordingly, a value of 0,70 indicates that the future productivity of a child born today will be 30 percent less than what he could expect with a full education and full health.

The top ten countries with the highest performance of the above index included: Singapore (0.88), Hong Kong (0.81), Japan (0.80), South Korea (0.80), Canada (0.80), Finland (0.80 .80), Macau (0.80), Sweden (0.80), Ireland (0.79), Netherlands (0.79).

In the second ten are: Great Britain (0.78), Estonia (0.78), New Zealand (0.78), Slovenia (0.77), Norway (0.77), Australia (0.77), Portugal (0.77), France (0.76), Belgium (0.76), Switzerland (0.76). Germany occupies 25th place (0.75), USA - 35th (0.70), China - 45th place (0.65), Turkey respectively 48th (0.65). Russia can also be noted - 41st place (0.61), Belarus - 36th place (0.70), Azerbaijan - 83rd place (0.58), Georgia - 85th place (0.57) [5].

Of the 174 countries in the world analyzed in this study, the last ten include the poorest countries in Africa, which are characterized by low Human Capital Index. In particular, the 170th place is occupied by Mali (0.32), then, respectively, Niger - 171st place (0.32), South Sudan - 172nd place (0.31), Chad - 173rd place (0.30), CAR - 174th place (0.29).

If we analyze the individual components included in the Human Capital Index both in 2020 and in the previous years studied (2015, 2017), we can see that in terms of the chance to live to 5 years, the average number of years of schooling, the quality of education, % of children up to 5 years, not lagging behind in growth, the survival of the adult population, countries included in the first few decades, show relatively high, stable rates.

Relatively low rates are observed in African countries, which occupy the last lines of the rating. In particular, the survival rate of the adult population in a number of African countries, which are in the last places in the ranking, ranges from 60 to 70% [5].

The components of health status and educational attainment included in the Index were used in combination, reflecting their contribution to the level of productivity and the accumulation of public goods. At the same time, the choice of the components of the Index was planned to study the measurement of human capital of the next generation, and not to the pool of human capital that the current economically active population has.

It should be noted that, undoubtedly, in the long term, human capital is of great importance for society, as it is one of the driving forces for sustainable economic growth, but even so, it is sometimes difficult for many states and structures dealing with these issues to convincingly justify investments in it.

Despite the fact that the governments of many countries allocate significant shares of budget funds to the development of education and health care, public services are often unable to form human capital due to their poor quality, and based on the experience of a number of countries, it can be concluded that investment in human capital may not give economic returns for years.

Human capital is people with the knowledge and skills that create value in the global economic system. The effective implementation of human capital, which is of great socioeconomic, moral, and even political importance, should be ensured through capital investments in education and health care, in the training of qualified personnel and investment in science.

In recent years, significant work has been done in Azerbaijan to implement human capital in the field of raising the level of education, training specialists in various fields, annually increasing budget funds allocated to this area, as well as solving social problems of educators, increasing student scholarships, accepting talented students in foreign universities, improving the professional level of teachers.

The focus is on strengthening the material and technical base of secondary and higher educational institutions, new buildings of general education schools and universities are being built every year in the country, enrichment and new laboratories are being built.

The amount of funds invested in the use of information and communication technologies in higher and secondary schools in Azerbaijan is growing. At present, an information society and a knowledge-intensive economy have been formed in our country, the sustainable development of information and communications has become one of the priorities of state policy, its important role has begun to be felt not only in socio-economic development, but also in the development of education and science.

At the same time, special attention should be paid to the training of highly qualified scientific and pedagogical personnel for the education system, the principle of building the development of education and science on a scientific basis in the country should be consistently continued, and the mechanism for financing education and science should be revised.

These measures will create favorable conditions for improving the quality of education and healthcare, improving the technical knowledge, skills and abilities of personnel, increasing the efficiency of their work, and will contribute to the further development of human capital.

References / Список литературы

1. Anikin V.A. Chelovecheskiy kapital: stanovleniye kontseptsii i osnovnyye traktovki // Ekonomicheskaya sotsiologiya, 2017. T. 18. № 4. S. 120-156.

2. Samuel'son Pol A., Nordkhaus Vil'yam D. Ekonomika: Per. s angl. M.: «BINOM». «Laboratoriya Bazovykh Znaniy», 1997. 800 s.

3. Menk'yu N.G. Printsipy Ekonomiks. SPb: Piter Kom, 1999. 784 s.

4. Becker Gary S. Human capital: theoretical and empirical analysis, with special reference to education. N.Y., 1964. 392 p.

5. Reyting stran mira po Indeksu chelovecheskogo kapitala. [Electronic Resource]. URL: https://gtmarket.ru > ratings > human-capital-index/ (date of access: 08.05.2022).

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