Human Capital, Urbanization and Dynamics of Economic Growth and Development

Abstract

The process of economic growth and development has been shifted towards new strategies of entrepreneurship, institutional development, and market development. The shifting of the development process towards new strategies needs human capital, developed infrastructure, and effective policy reforms. This study investigates how urbanization impacts economic growth and development through the channels of external economies, institutional development, and human capital accumulation. The study focuses first on finding the relationship between human capital and urbanization and their convergence towards economic growth through capacity development. Secondly, it examines the role of urbanization in the formation of human capital and finds the channels through which it facilitates markets. By using econometric time series techniques, we found that urbanization plays a key role in the accumulation of human capital through structural changes and has a long-term relationship with economic growth and development. Our analysis shows that the demographic change of the population from rural to urban stimulates infrastructural development, investment in human capital, and institutional arrangements. Results of the study also suggest that the process of demographic transformation not only increases entrepreneurship activities but also drives up the living standards of citizens through the provision of social services.