Investment Rates in Physical and Human Capital and Their Effects on Income Per Capita Growth
Overview
This paper examines how changes in investment rates in physical and human capital affect the growth rate of income per capita, using Korea as a case study. The author defines and analyzes physical capital and human capital, then discusses their respective impacts on productivity, wages, and national income levels.
What this coursework covers
- Theoretical Discussion: Definitions of physical capital and human capital with practical examples
- Analysis of physical capital investment effects on worker productivity and income
- Analysis of human capital investment effects through education and skill development
- Comparison of outcomes from high and low investment scenarios
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Development Economics Writing Assignment
Labeled, and informative graph capturing income, growth, and investment rates in physical and human capital for Korea.
Theoretical Discussion
Changes in investment rates in physical and human capital affect the growth rate of income per capita
Before explaining how changes in investment rates in physical and human capital affect the growth rate of income per capita, it is worth starting first by defining the key terms. Physical capital refers to already-produced goods that are used to produce others. For example, a carpenter uses a harmer to drive the nails into the wood when constructing a table. In this case, the hammer is a capital good – a physical item used to produce other goods. It is, however, worth noting that the carpenter would use a hard rock to drive the same nail into the wood but this might take a longer period, or even leads to more injury into the carpenter’s hands. Therefore, a hammer is a suitable capital good that would be chosen over hard rock. Human capital, on the other hand, refers to the sets of skills and knowledge that a group of individuals have in society (Murphy & Topel, 2016). What separates a pilot from non-pilot is the set of skills and knowledge that the pilot has as far as the aviation industry is concerned.
A country’s income per capita is dependent on both the rate of investments in both human capital and the physical capital.