Empirical Investigation of the Relationship Between Human Capital Investment and Economic Growth in South East Nigeria

Human capital theory predicts a positive relationship between educational investment and economic growth, and empirically testing this relationship in South East Nigeria provides locally grounded evidence for education investment policy at the state level. This study empirically investigated the relationship between human capital investment indicators and economic growth proxies across the five South East states: Anambra, Enugu, Imo, Abia, and Ebonyi, using annual panel data from 2010 to 2022. Human capital was proxied by government education expenditure per capita, primary school completion rates, and adult literacy rates. State-level GDP proxy indicators served as dependent variables. Fixed effects and random effects panel regression were applied, with the Hausman test used for model selection. Results showed that government education expenditure per capita had a significant positive effect on economic growth indicators (coefficient = 0.38, p < 0.001). Primary school completion rate showed a lagged positive effect consistent with investment-to-output lags in human capital accumulation. Adult literacy rate was significantly associated with higher economic activity in all five states. Anambra and Enugu showed the strongest human capital-growth relationships, reflecting more developed labour markets. The study provides zone-specific empirical evidence for the human capital-growth nexus and recommends South East state governments increasing education expenditure to a minimum of 20 percent of total budget, prioritising primary completion rates, and developing state-level economic zones that absorb skilled labour from improved human capital investment. Keywords: human capital, economic growth, South East Nigeria, panel data, education investment