Productivity effects of human capital: an empirical investigation of health and higher education in South Africa

The huge burden of diseases, poor higher educational outcomes in South Africa and their interaction on affecting productivity of human capital requires investigation for a context –specific policy advice. To this effect, the purpose of this paper is to investigate this relationship, alongside other factors, viewing human capital from the perspective of health, higher education enrolment (HEE) and higher education graduates (HEG). The study adopts time series autoregressive distributive lag (ARDL) with data covering the period 1980 - 2015. The study has found that, while GDP grows, employment rates and HEE have a positive impact on productivity in South Africa; capital stock and life expectancy exhibited an inverse relationship with productivity. These findings support the hypothesis that widespread antiretroviral therapy and resulting survival, without corresponding school sector focus on needed skills, relate negatively to productivity. The findings further support that enrolments affect positively productivity because they comprise individuals who are partly skilled in programs needed by the economy. Finally, they support the hypothesis that graduate outputs relate negatively to productivity because of mismatch of graduation skills and the economy’s need. As a policy suggestion, combined effort at school and health sector is needed in South Africa for increased productivity.