Abstract:
In this study, the relation between education and health that are accepted as an indicator of
human capital and economic growth is tested empirically. The study aimed at decomposing the
relationship between human capital (using health index and education index as a proxy) and
economic growth using time series data from 1971- 2011 in Ethiopia using modern econometrics
technique. Long-run relationship among variables is confirmed through Johnson co-integration
analysis whereas the long-run and short-run dynamics are observed by VECM specification. For
causality purpose both VECM based causality tests are employed. The finding indicates that in
the long run investment on education and health would affect further economic growth. Hence
policy makers and / or the government should strive to create institutional capacity that increase
school enrolment and improved basic health service by strengthening the infrastructure of
educational and health institutions that produce quality manpower. In addition to its effort, the
government should continue its leadership role in creating enabling environment that encourage
better investment in human capital (education and health) by the private sector. So any countries
policy designed to promote economic growth should have to consider priority in health and
education.
