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The knowledge and skills that make a worker more productive. Empirical evidence suggests that investment in human capital is a necessary precondition for the improvement of an efficient labor force. Human capital can be improved through formal education and on-the-job training. This requires investment in teachers, libraries, and quality instructional time.

Although early development models did not incorporate human capital, recent models show that human capital is as important as physical capital. Human capital explains to a greater degree the component of the Solow growth model (i.e., with improved technology, new capital is more effective than old capital—after Robert Solow, who received the Nobel Prize in Economics in 1987 for his work) that was once categorized as a residual, and it has been used contemporaneously to ...

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