SUIT Journal of Social Sciences and Humanities, Issue.1, 2016, Vol. 1, No. 1, 1-16 The Impact of Human Capital on Economic Growth: Evidence from Selected Asian Countries Jangraiz Khan 1 , Zilakat Khan Malik 2 and Yasir Arafat 3 Elementary and Secondary Education Department, Khyber Pakhtunkhwa, Pakistan 1 Department of Economics, University of Peshawar 2 Department of Economics, SUIT, Peshawar 3 Abstract The aim of this paper is to find out the role of human capital in economic growth of selected Asian countries namely Pakistan, India, Bangladesh and Sri Lanka. It is based on time series data for the period 1971- 2013. Ordinary least Squares (OLS) and Cointegration have been used as analytical techniques for this purpose. The results obtained through Ordinary least Squares show that human capital in form of education affects economic growth in all selected countries except India. The relationship is positive and statistically significant. Moreover, physical capital is another significant determinant of economic growth in the study area. When education is replaced by health as human capital, the OLS results demonstrate a little change showing human capital a significant determinant of economic growth but physical capital in case of India becomes insignificant. In order to avoid the doubt of spurious regression stationarity was checked by using the Augmented Dickey Fuller (ADF) test and long run relationship was analyzed by conducting Johansen Cointegration Test. The Cointegration test results confirmed the existence of long run relationship in human capital (education) and economic growth in Pakistan and Bangladesh. Moreover, there is long run association between human capital in form of health and economic growth in Pakistan, India and Bangladesh. It is therefore concluded that human capital in form of health and education is an important determinant of GDP per capita in most of selected countries. It is, therefore suggested to focus on health and education to reap the economies of sustained economic growth. Key Words: Human Capital, Economic Growth, Health, Education, South Asia JEL Classification: I25, O15,O47 Introduction The story of economic growth is not new one. It is extended backward to 18 th century. It is believed that the basis for economic growth was provided by the economists centuries ago. Smith (1776),Ricardo (1817), Ramsey (1928), Young (1928) and Schumpeter (1934) provided the concepts like competitive behavior, equilibrium dynamics, role of diminishing returns and per capita income( Barro and Sala-i-Martin, 2004). The legendary work of Solow (1956) and Swan (1956) opened new debate in the theory of economic growth which opened ways for other determinants of economic growth. The revolutionary work of economists in 1980s declared human capital as an important source of economic growth. The models of Romer(1986), Lucas (1988), Barro (1991) and Becker (1993) treated human capital as important source of economic growth. In 1980s, New Growth Theories led the developing countries to discover ways for utilizing its huge human resources. A large number of indicators like school enrollment, education expenditure, literacy rate, health expenditures, life expectancy, and, Research and Development (R&D) were combined in a term “Human Capital”. Becker (1993) called expenditures on education, medical care, computer trainings and experience as investments in human capital because skills and medical care are embodied in human and cannot be separated from them. Therefore this is referred to as human capital. According to Abbas (2001), there is positive relationship between human capital and economic growth