Oluyomi Ola-David Insights

Amongst several determinants of economic growth and development, capital plays a critical role. We can identify two broad types of capital important to any economy – physical capital and human capital. Physical capital comprises of buildings, machines, technical equipment and stock of raw materials; all of which are used in the production of goods and services. Alternatively, human capital is a term used to represent the collection of people’s knowledge, skills, abilities, and a gamut of productive attitudes. It is beneficial to the production process and valuable to those who own it. While it is important to acknowledge that all forms of capital have balancing roles, the importance of human capital over physical capital is especially worthy of note. One of the ways by which economists have emphasised the importance of human capital over physical capital is by comparing the distribution of income among those who own physical capital vis-à-vis those who own human capital. Just as

Economists are keenly interested in how income is distributed among the population. Why? It is only fair to be concerned about inequality because, the number of poor persons in country and the average quality of life depends on the equal or unequal distribution of income. Also, though high levels of inequality may lead to growth as some stages of development (see Kuznet’s hypothesis), high inequality tends to be tricky for the economy at other times. What then is inequality? Whenever there exists a disproportionate distribution of total national income among households, there is inequality. In most cases, the share of income attributed to the rich in a typical country is far greater than the share attributed to poor segments of the population. Needless to say that inequality of income is observable in every country of the world, developed and developing countries alike. However, the extent of inequality differs from country to country. For the most part, higher observable ine