Establish a relationship between human capital investment and productivity growth in Malaysia

Rapid economic growth and improving living standards have benefited almost all regions of the world since the industrial revolution. The main focus of this dissertation is to explore the role that human capital investment should participate in improving the nation's productivity. The study involves two way links between the total public health services expenditure with the productivity growth, measured in RM million terms, and between the total education expenditure with the productivity growth. The total expenditure included the federal government's total operational and total development expenditure on the public health services and education. The models included in this study are based on the Cobb-Douglas production function where human capital variable is added to examine the relationships .This study examines the cointegration level to check the existence of a long-run relationship between the variables. In addition, this study conducts the Granger Causality test to examine the causality pattern in the model. From the Pearson correlation test, it shows the models in this study show a strong correlation relationship. This study determining the direction of causality shows along-run causality relationship between the total productivity with the total expenditure on public health services, and between the total productivity with the total expenditure on education as well