Forman Journal of Economic Studies Vol. 16, 2020 (January–December) pp. 133-152 DOI: 10.32368/FJES.20201606 An Empirical Relationship Between Human Capital, Institutional Quality, and Economic Growth in Pakistan Abdul Farooq 1 , Sarah Arshi 2 , Nyla Sattar 3 and Amber Khalil 4 Abstract Pakistan is a developing economy where different policies have been adopted to increase economic growth, but the targeted growth rates have remained an elusive dream. Low quality of institutions and less attention towards the development of human capital are two major reasons for this failure. This study explores the association of institutional quality and human capital on economic growth in Pakistan from the time period between years 1984 to 2018. For the estimation of our model, Auto-Regressive Distributed Lag (ARDL) model has been used. The variance decomposition analysis is also used to check the shocks, direction, and magnitude of the shocks within the selected variables. Impulse response function confirms that the magnitude and direction of the shocks are positive. The outcome of this research suggests that accumulation in human capital increases productivity, and institutional quality helps to sustain economic growth. Therefore, policy makers should design such policies, which are helpful for the development of human capital. It is also recommended that law and order situation be improved so that the confidence of people and trust of investors is restored that eventually will drive economic growth in Pakistan. Keywords: Economic growth, Human capital, Institutional quality, ARDL. JEL Classification: C15, D1, D63, E2, H2 1. Introduction Human capital has a crucial role not only in the production process but also in all sectors of the economy. Due to effective rule of law, labor performs more efficiently in that specific sector and enhances economic growth. Substantial and sustained economic growth is the primary goal of all economies. The nature of economic growth depends on both economic and non- economic factors (Nawaz, 2015). Enhancing and maintaining economic growth are 1 Assistant Professor, Department of Economics, COMSATS University Islamabad, Lahore Campus. 2 Former student, Department of Economics, National College of Business Administration and Economics, Lahore. 3 Former student, Department of Economics, National College of Business Administration and Economics, Lahore. 4 Lecturer, Department of Management Sciences, Islamia University Bahawalpur, Bahawalnagar Campus. The paper is based upon the M. Phil thesis of the second author. Corresponding author’s Email: afarooq@cuilahore.edu.pk