Can Macroeconomic Impact of Human Capital be Modeling? Bahrain Experience

The objective of this study is to develop a small dynamic model for Bahrain economy in order to examine the effect of human capital investment on key macroeconomic variables through forecasting and simulation. The results clearly indicate that the human capital investment positively affect the real output of the country over the period of 1990 and 2015. Additionally, forecasting and simulation for the model in different scenarios show that an adjustment in government spending on education enhances both labor demand and GDP growth rates which raise much due mainly to employment and multiplier accelerator principle. Proposed model could be handy for policy makers to find out some of the paths while evaluating the major macroeconomic variables associated with the spending on education.