The role of human capital development in urbanization-economic growth nexus: A new insight on Nigeria

Abstract

Given the inevitable rise in global urban size, it has become pertinent to prioritize sustainable urban development which supports economic growth. Hence, the surge in sustainable urban-economic growth literature. Moreover, there is a growing argument that the growth effect of urbanization is contingent on the mediating roles of certain macroeconomic factors. However, despite being one of the fastest urbanizing countries in the world, extant studies on urbanization-economic growth nexus in Nigeria are few and the possible modulating roles of macroeconomic factors in the nexus has not been studied. Therefore, using annual data spanning between 1991 and 2022, this study examines the modulating effect of human capital development (HCD) in the relationship between urbanization and economic growth in Nigeria. For the empirical analysis, the study adopts the autoregressive distributed lag error correction model (ARDL-ECM). Robustness of the findings is tested using the dynamic ordinary least square (DOLS) estimator. The regression outcomes s show that while urbanization independently does not promote economic growth, its interaction with the measure of HCD produces a positive coefficient suggesting that HCD mitigates the adverse effect of urbanization on economic growth. Based on the findings, the study recommends that urban development policies should be compatible with achieving well-managed cities in order to harness the agglomeration economies benefits of increasing urbanization process. In addition, due to the favourable role of HCD in the urbanization-economic growth relationship, strategic plans focused on promoting human capital in the form of education and health should be focalized in urban development policies.