Relationship between Human Capital and Labour Productivity

Abstract

This study aims to examine the role of human capital in labor productivity with special reference to Pakistan. The dependent variable of our study is labor productivity and independent variables are human capital which is measured by employee age, employee education, employee training, employee wage, financial participation and working hour. This study uses the Generalized Method Moments (GMM) technique to examine the effect of human capital on labor productivity. The coefficient of employee education indicates that there is positive correlation between employee education and labour productivity. Hence, in Pakistan education is more powerful element to increase labor productivity. The coefficient of employee training tells us that one percent increase in investment on training will result in 0.10 percent increase in labor productivity. The variable employee age has negative correlation with labor productivity. However, this relationship is not statistically significant. The variable Financial Participation and labour productivity has insignificant relationship. The finding further indicates that variable working hour and labour productivity has positive association. The coefficient of Employee Wage is 0.007454, which tells us that wages has positive and significant effect on labor productivity. Key words: Labor Productivity, Human Capital, Human Resources.