It can be said that the government spending on the different education levels is an indicator of the human capital that will be formed in the country and which will then lead to economic growth and development. Education-education has many definitions. For the purpose of this paper, education is defined as the process through which human beings learn and through which knowledge is passed on and the mental faculties are trained. Education is a process that is continuous and through which one’s mental capabilities grow and develop. Most of the formal education systems have three levels of education, which are the primary level, the secondary level and the tertiary level which includes the institutions of higher learning.
Basic education has to do with the individual attaining literacy and basic arithmetic competence. Formal education system is the organized school system in a given country. This system has a set academic year, a standard curricular that is regulated and upon completion, there is recognized certification. The levels of formal education are the primary school, secondary schools and the tertiary institutions. Human capital refers to the productive investment that is made in human person it is a combination of abilities, skills, abilities and health that are as a result of expenditures that have been made on medical care and training for job performance.
This is different from physical capital which refers to the tangible investments which includes buildings and machinery. Economic growth refers to the process through which the economy’s productive capacity increases over a period of time. The effect is a rise in the level of national income and output. Labor productivity is the level of output that exists per every unit of labor input.
Labor productivity is usually measured in terms of the output per worker per year. Development is the process through which the quality of human life is improved. Development usually involves three aspects which include enlarging the range of choices that people have to choose from and creating conditions that are conducive for the people’s self-esteem to grow. It also involves the raisin of people’s levels of living. Theories on the impact of education on the economy Blundel, R.et al.
(1999 1-23) assert that while looking at the impact that higher education has on economic development, there are three theories that ca be used. These theories include the economic dependence, the human capital and the modernization theory.