Human Capital, Urbanization and Dynamics of Economic Growth and Development

Process of economic growth and development has been shifted towards new strategies of entrepreneurship, institutional developments and market development. The shifting of development process towards new strategies needs human capital, developed infrastructure and effective policy reforms. This study investigates that, how urbanization impacts economic growth and development through the channels of external economies, institutional development and human capital accumulation. The study focuses first to find the relationship of human capital and urbanization and their convergence towards economic growth through capacity development. Secondly, it examines the role of urbanization in the formation of human capital and to find the channels through which it facilitates the markets. By using econometric time series techniques we found that urbanization plays a key role in the accumulation of human capital through structural changes and have long run relationship with economic growth and development. Our analysis shows that the demographic change of population from rural to urban stimulates the infrastructural development, investment in human capital and institutional arrangements. Results of the study also suggest that the process of demographic transformation not only increases the entrepreneurship activities but also drives up the living standard of citizens with provision of social services