Capital and Labour Productivity: A Comparative Study of Nigeria and South Africa

Abstract

The emerging consensus in literature is that growth is dependent on the size and components of capital and labour force productivity. Using a comparative study between Nigeria and South Africa, this study aims to determine how human and physical capital affect labour productivity. The augmented Solow growth model was adapted and the resulting model was estimated using Johansen cointegration to establish the link between capital (labour) productivity and its determinants. This study found that both human and physical capital significantly affected labour productivity in both countries, though South African productivity was more responsive to changes in physical capital. Unemployment showed a positive link, but labour force showed an inverse relationship with labour productivity in South Africa. In Nigeria, school enrolment, capital stock and labour force had negative relationships with labour productivity, while unemployment had a positive relationship. Hence, this study recommends an increase in human and physical capital investment and entrepreneurial activities.