Fundamentals: Labour Markets and Human Resource Development

Abstract

There is little doubt that labour is the most important factor of production as it is indispensable in the production process. Thus, the efficient use of the labour endowment of a country is crucial for its rapid economic growth (see Lucas, 1988; Rebelo, 1991). The role of policy in enhancing the productivity of labour can be important in two ways: firstly, policies that provide an environment for the smooth functioning of labour markets can greatly increase labour productivity by making it possible for workers to be allocated to their most productive uses. Secondly, the role of policy is critical in the accumulation of human capital either by direct investment by the state in systems of education and training, or by making investment in schooling profitable to households. We call the first set of policies labour market policies, and the second policies relating to human resource development. In this chapter, we review these two set of policies in East Asia and India and analyse their role in determining the differing successeses of East Asia and India in manufacturing exports.