Human capital development and international trade in Lesotho

Abstract

This chapter unequivocally demonstrates that when a small economy opens up to trade, decision-making is significantly impacted, and countries with low human capital stocks tend to increase their accumulation of human capital. Trade should cause countries to diverge in their stocks of human capital when human capital is considered a production factor. The education of the labour force and the accumulation of human capital significantly influence a country's ability to generate new ideas and adapt existing ones. It is beyond dispute that human capital enhances international trade through channels of international technological spillovers, such as domestic productivity and foreign direct investment. The vast quantity of research on human capital development has placed education at the forefront as a form of investment in this capacity. Lesotho's human development index averaged 0.471, with a recent estimate of 0.514 in 2021, indicating that human capital development is determined by literacy, health, gross domestic product per capita and economic openness, among others. However, according to the research, human capital development progression in Lesotho is severely hindered by insufficient health care provision, high unemployment and underemployment, brain drain, gender inequalities and limited investment in skills development. This directly and indirectly affects the productive capacity of goods and services and international trade. Thus, Lesotho's government officials and policymakers must immediately direct more funds towards investment in the education and health care sectors to achieve productive exports and economic growth.