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Scott Rozelle Stanford University (Senior Fellow)

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1 Human Capital Roots of the Middle Income Trap: Education, Nutrition and Health Inequality in China
Scott Rozelle Stanford University (Senior Fellow) Director, Rural Education Action Project (REAP) & Collaborators in China, the US and Elsewhere 1

2 Two goals 1. Tell a story (and show some numbers):
about Growth/Development and Inequality (as a way to motivating why it is that inequality is important) … this is a story (not evidence) … it may or may not be true … but, I think the question is “is it possible” … and if it is, is there any thing we can do about it … and is it worth the investment (even as an insurance policy) … 2. Try to show you the extent of human capital inequality in China today … and why if it is not addressed, tomorrow’s income inequality is likely to be very high … and how, if nothing is done about it, how such high human capital inequality today may be what undermines / endangers China’s future growth.

3 We all know why such a large share of the things the world makes are manufactured in China today! It is because China’s wage rates were so low in the 1980s and 1990s … 0.50 China US Japan EU Korea Australia Mexico Brazil Sri Lan. Hourly Wage, 1990s 3

4 Korea 1970s /Early 1980s Hourly Wage, 1990s
But, it was not always like this … in the 1970s and 1980s, most things were made in South Korea (and Taiwan, Hong Kong, Singapore … and Mexico) Korea 1970s /Early 1980s 0.50 0.75 China US Japan EU Korea Australia Mexico Brazil Sri Lan. Hourly Wage, 1990s 4

5 Korea 1970s /Early 1980s Korea Today Hourly Wage, 2005
But through the 1980s and 1990s, South Korea’s wages rose rapidly … Korea 1970s /Early 1980s Korea Today 13.56 0.75 0.50 0.75 China US Japan EU Korea Australia Mexico Brazil Sri Lan. Hourly Wage, 2005 5

6 And a transformation took place in its economy (and work force):
From a low-wage, labor-intensive economy … … to a high-productivity, service-base, innovative-based economy The 1970s/Early 1980s Late 1990s to Today

7 How did South Korea make this transformation?
South Korea in the 1970s/1980s Percent of students that go to High School In no small part it was due to the fact that it labor force was highly educated … Even in the early 1980s, almost everyone (urban and rural) in South Korea graduated from high school 1980s Today 7

8 But, not all countries made this transformation (from middle income to rich) as smoothly in the 1980s and 1990s as South Korea

9 Mexico Early 1970s Hourly Wage, 1990s
That is not to say that there were not other candidates for “developing” successes in the 1970s/80s/early 90s … One was our neighbor, Mexico … although wages in the 1970s were low … manufacturing was growing … Mexico Early 1970s 4.00 0.50 0.75 China US Japan EU Korea Australia Mexico Brazil Sri Lan. Hourly Wage, 1990s 9

10 Mexico Mexico Early Mid-1990s 1970s 4.00 Hourly Wage, 1990s
And just as in Korea, wages in Mexico began rising in the late 1980s and early 1990s … Mexico looked like it was on the path to becoming a developed country … Mexico Early 1970s Mexico Mid-1990s 4.00 0.50 0.75 China US Japan EU Korea Australia Mexico Brazil Sri Lan. Hourly Wage, 1990s 10

11 As would be expected, low-wage factories in Mexico shut down and moved elsewhere in the world

12 The hope was that employers would invest in higher productivity jobs that would be able to support the rising wage rates (this is what development is all about, after all …)

13 South Korea in the 1970s/1980s Mexico in the 1980s!
BUT, Mexico’s education system did not succeed in educating large share of the labor force for the new economy … South Korea in the 1970s/1980s Mexico in the 1980s! Percent of students that go to High School 1980s 1980s Today 13

14 Mexico in Crisis Travel Warning U.S. DEPARTMENT OF STATE Bureau of Consular Affairs, Mexico Foreign Direct Investment in Mexico Cartels & gangs Violence Unemployment

15 In fact, history is littered with a lot of wannabe OECD members:
This motivates a more fundamental question: Is it inevitable that Developing Countries that are growing fast and achieve Middle Income status always will continue to grow and become rich, industrialized nations? In fact, history is littered with a lot of wannabe OECD members: Argentina … one of the four richest countries in the world in the early 20th century … collapse and stagnation after WWII Uruguay / Iraq / Venezuela (in the 1960s & 70s) MORE RECENTLY: How about .Mexico / Egypt / Tunisia / etc

16 List of Countries/Regions that Have Moved from Middle Income to High Income After WWII [“Graduates”]
East Asian Countries / Regions Mediterra-nean Eastern Europe Others (oil countries*) S. Korea Portugal Croatia E. Guinea* Taiwan Spain Slovenia Trin & Tob* Greece Slovak Rep. Israel Hungary Ireland Czech New Zea. Estonia

17 List of Countries/Regions that Have Moved from Middle Income to High Income After WWII and the GINI Ratios (“Graduates”) East Asian Countries / Regions Mediterra-nean Eastern Europe Others S. Korea (32) Portugal (38) Croatia (34) Ireland (34) Taiwan (32) Spain (35) Slovenia (31) New Zea. (36) Greece (34) Slovakia (26) Israel (39) Hungary (31) Czech (26) Estonia (36)

18 List of Countries/Regions that Have Moved from Middle Income to High Income After WWII and the GINI Ratios (“Graduates”) East Asian Countries / Regions Mediterra-nean Eastern Europe Others (oil countries*) S. Korea (32) Portugal (38) Croatia (34) Ireland (34) Taiwan (32) Spain (35) Slovenia (31) New Zea. (36) Greece (34) Slovakia (26) Israel (39) Hungary (31) Czech (26) Estonia (36) Growth With Equity

19 Aspiring Middle Income Countries (“Aspirees”)
Argentina Brazil Chile Costa Rica Malaysia Mexico Russia Thailand Tunisia Turkey Uruguay Venezuela + China

20 Aspirees Inequality (gini ratios)
Argentina (46) Brazil (54) Chile (52) Costa Rica (50) Malaysia (46) Mexico (52) Russia (42) Thailand (42) Tunisia (41) Turkey (43) Uruguay (42) Venezuela (44)

21 Aspirees Inequality (gini ratios)
Argentina (46) Brazil (54) Chile (52) Costa Rica (50) Malaysia (46) Mexico (52) Russia (42) Thailand (42) Tunisia (41) Turkey (43) Uruguay (42) Venezuela (44) Average Aspirees: 47

22 Aspirees Inequality (gini ratios)
Argentina (46) Brazil (54) Chile (52) Costa Rica (50) Malaysia (46) Mexico (52) Russia (42) Thailand (42) Tunisia (41) Turkey (43) Uruguay (42) Venezuela (44) China: ≈50 and rising!

23 The stories of Korea and Mexico provide the backdrop for interpreting what is happening in China today and where China is heading While low wages and labor-intensive manufacturing fueled economic growth in China in the 1980s and 1990s … China today (like Korea and Mexico earlier) is entering a new era … 0.75 0.50 China US Japan EU Korea Australia Mexico Brazil Sri Lan. Hourly Wage, 1990s 23

24 Unskilled wage Annual Real Hourly Wage (1978 dollars)
≈ $2.00 / hour in 2011 Unskilled wage ≈ 30 ¢ / hour in 1978 So, the stories of Korea and Mexico provide the backdrop for interpreting what is happening in China today and where China is heading … and dangers of instability that it may be facing … So while low wages and labor-intensive manufacturing fueled economic growth in China in the 1980s and 1990s … China today (like Korea and Mexico earlier) is entering a new era … The wages of 50 cents to 75 cents an hour of the 1980s and 1990s are now up to $2/hour … and rising fast … At the current pace of growth – the unskilled wage is rising faster than GDP … wages could hit 10 to 15 dollars an hour by 2025 to 2030 … 10 to 20 years from now … just like South Korea today … and it is what China wants … to be a high wage country … with levels of prosperity for its citizens that rival those of the developed world today .. 2010 Park and Cai, 2008 24

25 Implications By 2025 to 2030  $6 to $8 to $10/hour
China continues to grow: RISING DEMAND Size of labor force falls: FALLING SUPPLY Rising wages in the future Changing industrial structure By 2025 to 2030  $6 to $8 to $10/hour 25

26 26

27 27

28 Source: International Labor Organization LABORSTA Database
How Expensive are Chinese Workers? Manufacturing Wages (USD/year) China Philippines Thailand China Indonesia India Of course, as we will see later in the presentation, this also has implications for farming Source: International Labor Organization LABORSTA Database

29 But, with higher wages, can China move itself up the productivity ladder
29

30 “Textile worker” in high wage countries
“made to order” Gucci shoe factory To do his job, he needs to be competent in math, language, English and computers … 30

31 Will these young women … who are working in China’s textile plants now … be able to do the job in a modern high fashion textile plant? Unfortunately, most barely know how to read and write … 31

32 This is my auto mechanic … in Palo Alto …

33 Question: “Will these boys be able to do the jobs that need to be done in the future economy?”
None of these students have ever touched a computer or surfed the web 33

34 So: China’s real challenge is coming … and there are fundamental questions:
Can China transform itself like: South Korea / Spain / New Zealand Or  will China become a: Mexico / Argentina 34

35 A Middle Income Trap? What is the problem of trying to move from middle to high income with such high levels of inequality? A lot of it has to do with the slowing growth that occurs during this phase of development … … and the stability of a country [can all individuals share in the prosperity (when growth stops? … and if they can’t will they take actions that will slow growth further?]

36 Key question: What will China’s inequality be like in the coming years (when growth slows)?
Sure it is high now … but, will it be high when China’s growth inevitably slows? To examine this question rely, in part, on part of this equation: Today’s human capital inequality among children (health / nutrition / education) is one of the strongest determinants of tomorrow income inequality

37 China’s Inequality in 2025 to 2030 [must look at one of the “iron laws of inequality]
Income Inequality TODAY + Human Capital Inequality TODAY = Income Inequality TOMORROW

38 China’s Inequality in 2025 to 2030 [must look at one of the “iron laws of inequality]
Income Inequality TODAY  VERY HIGH + Human Capital Inequality TODAY = Income Inequality TOMORROW

39 China’s Inequality in 2025 to 2030 [must look at one of the “iron laws of inequality]
Income Inequality TODAY  VERY HIGH + Human Capital Inequality TODAY ? = Income Inequality TOMORROW Education equality? Health equality? Nutrition equality?

40 China’s Inequality in 2025 to 2030 [must look at one of the “iron laws of inequality]
Income Inequality TODAY  VERY HIGH + Human Capital Inequality TODAY ? = Income Inequality TOMORROW Education equality? Health equality? Nutrition equality?

41 What will China’s inequality be like in 2025 or so?
Sure it is high now … but, will it be high when China’s growth slows? To examine this question rely, in part, on part of this equation: In short: Today’s human capital inequality among children (health / nutrition / education) is one of the strongest determinants of tomorrow income inequality  are workers today employable tomorrow?   and a strong determinant of tomorrow’s stability

42 Rest of presentation Examine Today’s China Human Capital Inequality?
How equal are China’s education skills? How poor is nutrition in China’s poor rural areas? How are China’s health outcomes distributed between eastern and western China?

43 So: What is the nature of China’s human capital today
So: What is the nature of China’s human capital today? … in poor rural areas ? ≈ 45 (nearly half) of school-aged children in poor rural areas (≈ 80 million children, ages 6 to 15 … > 100 million if include infants and toddlers) cities other rural Remember: today’s children are tomorrow workers and professionals …

44 How unequal is China’s education system today?
infants elementary junior high vocational academic college school school high school high school

45 How unequal is China’s education system today?
infants elementary junior high vocational academic college school school high school high school

46 Probability of a child from a poor rural area going to college (relative to child from the city)
Times (x) 8 out of 100 (rural) versus 70 out of 100 (urban) Urban 21x Urban 13x Urban Poor Rural 8x Poor Rural Poor Rural Using data for 6 million Gaokao takers (2003)

47 Probability of a child from a poor rural area going to college (relative to child from the city)
Times (x) Urban 53x 5 out of 100 versus 75 out of 100 Poor rural youth Urban 32x Urban Poor Rural 15x Poor Rural Poor Rural Urban youth Using data for 6 million Gaokao takers (2003)

48 Probability of a child from a poor rural area going to college (relative to child from the city)
Times (x) Urban 21x Urban 13x Urban Poor Rural 8x Poor Rural Poor Rural Even worse odds for four year colleges … and elite colleges …

49 Probability of a child from a poor rural area going to college (relative to child from the city)
Times (x) Urban 21x Do you know how many poor, rural, female minorities are in PKU and Tsinghua? Urban 13x Urban Poor Rural 8x Poor Rural Poor Rural

50 Probability of a child from a poor rural area going to college (relative to child from the city)
Times (x) Urban 21x Urban Only 7 13x Urban Poor Rural 8x Poor Rural Poor Rural Do you know how many poor, rural, female minorities are in PKU and Tsinghua?

51 How unequal is China’s education system today?
infants elementary junior high vocational academic college school school high school high school

52 While all kids do not need to go to college, all children should be going to high school … to get skills for workforce 20 years from now!! … as we have seen from the discussion above, this is critical at this stage of development to get all children the skills they will need in the future Only 40% of junior high grads in poor rural areas go on to academic high school .. 52

53 While all kids do not need to go to college, all children should be going to high school … to get skills for workforce 20 years from now!! … as we have seen from the discussion above, this is critical at this stage of development to get all children the skills they will need in the future BUT: Only 40% of junior high grads in poor rural areas go on to academic high school .. 53

54 High School Gap in China today
China in the Mexico in the 1980s! Percent of students that go to High School 54

55 South Korea/Taiwan in 1970s/1980s Mexico in the 1980s!
Who Does China Look Like? South Korea/Taiwan or Mexico? South Korea/Taiwan in 1970s/1980s Mexico in the 1980s! Percent of students that go to High School 1980s 1980s Today 55

56 High School Gap in China today
China in the Mexico in the 1980s! Difference between Mexico and China? This gap represents more than 100 million children / youth / young adults … If Chinese children do not get educated today … what are their options tomorrow? Percent of students that go to High School 56

57 Why is high school attendance so low?
High School Tuition Levels around the world (in US dollars – public rural high schools) China 57

58 Minister of Education (March 2013)
We will NOT eliminate tuition in Academic High School! We will NOT increase enrollment in Academic High School! Keep with the PLAN: expansion of education is through Vocational Education and Training (VET) So what do they say? Is this a good idea?

59 Minister of Education We will NOT eliminate tuition in Academic High School! We will NOT increase enrollment in Academic High School! Keep with the PLAN: expansion of education is through Vocational Education and Training (VET) So what do they say? Is this a good idea?

60 How unequal is China’s education system today?
infants elementary junior high vocational academic college school school high school high school

61 REAP study on VET in Zhejiang and Shaanxi
Vocational Education and Training (VET): Rich areas (75 VET programs in Zhejiang): Students are learning vocational skills Basic academic skills of students are NOT deteriorating Poor areas (65 VET programs in Shaanxi) Students are not learning any vocational skills Math and Chinese skills are deteriorating [Students are NOT learning anything in VET programs] [Students in academic high school (AHS) are learning

62 New study on VET in Zhejiang and Shaanxi
Vocational Education and Training (VET): Rich areas (75 VET programs in Zhejiang): Students are learning vocational skills Basic academic skills of students are NOT deteriorating Poor areas (65 VET programs in Shaanxi) Students are not learning any vocational skills Math and Chinese skills are deteriorating [Students are NOT learning anything in VET programs] [Students in academic high school (AHS) are learning]

63 New study on VET in Zhejiang and Shaanxi
Vocational Education and Training (VET): Rich areas (75 VET programs in Zhejiang): Students are learning vocational skills Basic academic skills of students are NOT deteriorating Poor areas (65 VET programs in Shaanxi) Students are not learning any vocational skills Math and Chinese skills are deteriorating [In other words: Students are NOT learning anything in VET programs in Poor Areas] So what are the consequences of such poor quality VET?

64 drop outs in VET [sample of 140 VET schools in ZJ and SX]
after 1 year after 3 years 61% 49% Drop out rate 22% 6% Rich Students Poorest students Average Poorest students

65 drop outs in VET [sample of 140 VET schools in ZJ and SX]
after 1 year after 3 years 61% Drop out rate 22% 25% 6% Rich area students Poorer Rich area Poorer students

66 In fact, REAP is showing the the problems are starting before upper secondary school **** Let’s examine the nature of Junior High education: quality of education nature of Junior High drop outs

67 How unequal is China’s education system today?
infants elementary junior high vocational academic college school school high school high school

68 Junior High School Student achievement gains (in 175 poor rural jr
Junior High School Student achievement gains (in 175 poor rural jr. high schools) using IRT-scaled achievement tests Lots of students had negative or zero gains in achievement!

69 Unsurprising: REAP study shows (in part due to poor quality of education / and rising wages) China’s rural students are not even getting through junior high school Drop out rate 14% % % Nearly 40 percent of students from poor rural areas are dropping out of JUNIOR HIGH SCHOOL! 9% + 15% 14% ? 15% + 14% 14% Grade Grade Grade 9

70 What are kids who are dropping out of Junior High today (they are 13 years old) going to do in 2030 (when they are 30 years old)? They barely know how to read They barely know how to write They are angry at the school system for ignoring them … and this translates into anger at the government & society! Is this the breeding grounds of China’s future instability?

71 How unequal is China’s education system today?
infants elementary junior high vocational academic college school school high school high school

72 Maybe the “REAL source” of problem begins before junior high school
Why? Poor quality of education in grades 1-9 and before Poor facilities … teachers … curriculum … Poor nutrition … 72

73 For example: There are many ways … many potential technology-based solutions …
In fact, in the 12th Five-year plan, the government is committed to supply every rural school with a computer room …

74 But, if the government just drops computers into rural schools is not enough…
74

75 Even Worse… Need to figure out sustainable, implemenatable, effective solutions 75

76 Maybe the “REAL source” of problem begins before junior high school
Why? Poor quality of education in grades 1-9 and before Poor facilities … teachers … curriculum … Poor nutrition / health!! No matter how much investment into facilities / teacher salaries & training / curriculum … if students are sick or malnourished, may not be able to learn … Is this a problem? 76

77 Maybe the “REAL source” of problem begins before junior high school
Why? Poor quality of education in grades 1-9 and before Poor facilities … teachers … curriculum … Poor nutrition / health!! No matter how much investment into facilities / teacher salaries & training / curriculum … if students are sick or malnourished, may not be able to learn … Is this a problem? 77

78 Between 2008 and 2012 we tested nearly 60,000 children across China for iron-deficiency anemia

79 In fact, anemia is all over China
Total 33.7 Shaanxi—2008 (Dataset 1) 37.5 Shanxi—2009a (Dataset 2) 31.6 Gansu—2010 (Dataset 3) 31.2 Qinghai—2009 (Dataset 4) 51.1 Ningxia—2009 (Dataset 5) 25.4 Sichuan—2010 (Dataset 6) 24.8 Guizhou—2010 (Dataset 7) 33.1 Luo, R., X. Wang, C. Liu, et al. (2011) “Alarmingly High Anemia Prevalence in Western China.” Southeast Asian Journal of Tropical Medicine and Public Health Vol. 42 No. 5

80 Poor areas of China Children with anemia (≈ 33%) Children with out ≈ 30 to 35 million school aged children are estimated to be suffering from malnutrition!

81 < 5 million school aged children in all of the rest of China
Non-poor areas of China Children with anemia (≈ 8%) < 5 million school aged children in all of the rest of China Children with out (92%)

82 Testing 19,500 children in Gansu and Shaanxi Provinces
myopic normal vision  5000 (≈25%) were myopic (or nearsighted).

83 Testing 19,500 children in Gansu and Shaanxi Provinces
myopic normal vision  5000 (≈25%) were myopic (or nearsighted). Only 650 had eyeglasses (≈ 3%) … only 1 of 8 that needed glasses have them …

84 The Scourge Within: Intestinal Worms in Rural China
We have tested nearly 5000 children for: Chinese Academy of Sciences Center for Disease Control, Shanghai Stanford University (with support of Asia Health Care Initiative funding)

85 Stanford alum volunteer, Susan Chen (class of 2009)

86

87 Incidences of Intestinal Worms, Guizhou Province, 2010
33.9% with worms 41.7% with worms Without Without And, this too is a source of health loss … nutrition loss … and education tragedy … Last summer I visited the village of Chen Hongli. She was 11 years old and lived in a poor mountainous village in Guizhou Province … During our study, we identified Hongli as being seriously infected with worms … She told me that until we dewormed her, she had had a stomach ache for as long as she could remember … Because of this, Hongli was severely stunted and wasted … she was only 137 cms tall and she weighed only about 25 kilograms … she also is so frequently sick that she missed more than 40 days of school last year … After taking the deworming medicine … she told us that her appetite is back and she is gaining weight … and best of all, she has not missed one day of school this year … Response by most ministries: Mostly: silence Why? They often say: “We know this / tell us what to do about it …” It is at this point that the main Role of my organization, REAP steps in … because: Herein lies the need for Action Research … Our goal is to demonstrated the effect of alternative interventions/programs in addressing these problems … what works … what does not work … So, what is REAP? 3 to 5 year olds to 10 year olds Zhang et al., 2011

88 … millions of children are infested with these …

89 How unequal is China’s education system today?
infants & elementary junior high vocational academic college toddlers school school high school high school

90 Even earlier (malnutrition during the first 1000 days)
Testing ≈1000 babies and their Mom’s in Southern Shaanxi (these areas are 2 to 3 hour drive from Xi’an – one of China’s fastest growing cities)

91 Even earlier (malnutrition during the first 1000 days)
Of the 948 babies tested (as of last week)  of them are malnourished [or ≈ 60 percent of infants are seriously sick]

92 Severe malnutrition problems in babies in China’s rural communities
Of the 949 babies tested (as of last night)  of them are malnourished [or ≈ 60 percent of infants are seriously sick] < 20% are stunted / wasted

93 What are the Cognitive Consequences of Malnutrition
All babies are being given an Infant IQ test (Bayles test) High school volunteer from Harker School (San Jose) … Wendy will be in Stanford’s new incoming class …

94 Cognitive Consequence of Malnutrition
Around 70 percent of infants FAILED their baby infant IQ tests Sub-normal cognition Sub-normal motor skills

95 Ultimate Consequences: If the micronutrient deficiencies of infants / toddlers are not corrected before baby is 30 months old  Life time effects on: IQ Mental health Height Weight Health

96 What does this mean? In harshest terms:
Between 20 to 30 percent of China’s future population are in danger of becoming PERMANENTLY physically and mentally HANDICAPPED By the way: we also executed several non-cognitive scales for infants … results available soon ..

97 Final Summary / Conclusions

98 What are the prospects for China’s inequality in the coming years?
Income Inequality TODAY + Human Capital Inequality TODAY = Income Inequality TOMORROW

99 What are the prospects for China’s inequality in the coming years?
Income Inequality TODAY (highest in the world) + Human Capital Inequality TODAY = Income Inequality TOMORROW

100 What are the prospects for China’s inequality in the coming years?
Income Inequality TODAY (highest in the world) + Human Capital Inequality TODAY (very high) = Income Inequality TOMORROW Unequal Education Unequal Nutrition Unequal Health

101 What are the prospects for China’s inequality in the coming years?
Income Inequality TODAY (highest in the world) + Human Capital Inequality TODAY = Income Inequality TOMORROW   EXTREME? Education equality? Health equality? Nutrition equality?

102 Summary of China’s development experience …
In past 30 years  success with growth BUT: at cost of GREAT inequality High income inequality today High human capital inequality today Fact: growth will slow Ageing / lower rate of effective investment Max rate of growth after 2030 is 2 to 3 to 4 % Many reasons to be concerned it will go to ZERO

103 Unlike the patterns of growth in countries that successfully graduated from middle income to high income Japan, South Korea, Taiwan, Ireland, New Zealand, Israel, Czech Republic, Slovikia … and more: GROWTH WITH EQUITY Argentina, Venezuela, Mexico, Brazil and Chile (in 1960s/1970s): GROWTH WITH HIGH INEQUALITY  COLLAPSE / STAGNATION

104 Unlike the patterns of growth in countries that successfully graduated from middle income to high income China is NOT on the path of  Japan, South Korea, Taiwan, Ireland, New Zealand, Israel, Czech Republic, Slovikia … and more: GROWTH WITH EQUITY Argentina, Venezuela, Mexico, Brazil and Chile (in 1960s/1970s): GROWTH WITH HIGH INEQUALITY  COLLAPSE / STAGNATION

105 GROWTH WITH HIGH INEQUALITY  COLLAPSE / STAGNATION
Unlike the patterns of growth in countries that successfully graduated from middle income to high income Japan, South Korea, Taiwan, Ireland, New Zealand, Israel, Czech Republic, Slovikia … and more: GROWTH WITH EQUITY Argentina (in the 1950s); Venezuela, Brazil and Chile (in 1960s/1970s); Mexico (Today): GROWTH WITH HIGH INEQUALITY  COLLAPSE / STAGNATION In many ways, China is following the paths of 

106 Can China address this issue?
Can not do much about growth? [Growth will slow … of course, need to keep growth as high as possible for as long as possible … raises issues of sustainable growth … save for another time] Can not do anything about Today’s Income Inequality (it is a FACT) One of main interventions  Investment Heavily TODAY in human capital … for ALL

107 Declare WAR on RURAL EDUCATION, NUTRITION and HEALTH
Better classrooms / Better teachers / Better curriculum Vitamin / day  0.2 yuan per day Eyeglasses  80 yuan per yuan (< 0.10 yuan per day) Deworming  1-2 yuan per year Early Childhood Education Computer room + Software + Teacher training Computer Assisted Learning Conditional cash transfers for junior high students Counseling programs VET internships Making High School Free [read off slide] The optimistic view: China can overcome it … Aggressively invest (declare “war on rural education) … it is late … but, not too late … there is exactly enough time starting now … Plenty of fiscal resources … growth is top priority … we must convince decision makers that a War on Rural Poverty is in their own interest … the future of China’s growth depends on it … as perhaps does the future of China, in general!

108 The Intervention “Vitamin / Day”
Give students one over the counter multi-vitamin with iron per day (5 mg of iron) … from November 2008 to May 2009 (≈4 US cents/day)

109 Chewable Vitamin per Day

110 Impact of vitamin on students:
Hemoglobin Points Anemia Rates (%) Math Test Scores (std. dev.)

111 250 Quanta Computers into 50 Migrant Schools in Beijing …
490 Desktop Computers into Rural Schools in the Mountains of Southern Shaanxi 550 ACER Computers into Rural Schools into Some of the Poorest Minority Schools in Qinghai

112 250 Quanta Computers into 50 Migrant Schools in Beijing …
490 Desktop Computers into Rural Schools in the Mountains of Southern Shaanxi 550 ACER Computers into Rural Schools into Some of the Poorest Minority Schools in Qinghai

113 250 Quanta Computers into 50 Migrant Schools in Beijing …
490 Desktop Computers into Rural Schools in the Mountains of Southern Shaanxi 550 ACER Computers into Rural Schools into Some of the Poorest Minority Schools in Qinghai

114 Impact of Computer Assisted Learning Program on Student Learning
Standard Deviations Control CAL Control CAL Control CAL

115 My Group (REAP) with the support of many in China, the US and elsewhere in the world … has shown that these work to improve health, nutrition and education … And, government is willing to partner to upscale … 115

116 Can China Afford This? Better classrooms / Better teachers / Better curriculum Vitamin / day  0.2 yuan per day Eyeglasses  80 yuan per yuan (< 0.10 yuan per day) Deworming  1-2 yuan per year Early Childhood Education Computer room + Software + Teacher training Computer Assisted Learning Conditional cash transfers for junior high students Counseling programs VET internships Making High School Free [read off slide] The optimistic view: China can overcome it … Aggressively invest (declare “war on rural education) … it is late … but, not too late … there is exactly enough time starting now … Plenty of fiscal resources … growth is top priority … we must convince decision makers that a War on Rural Poverty is in their own interest … the future of China’s growth depends on it … as perhaps does the future of China, in general!

117 Yes … easy … Keep its promises: Reallocate (Half of Moon Budget)
Government promised to spend 4% of budget to education [have never made it] Reallocate (Half of Moon Budget) Allocate all increases fiscal funds from today on (don’t displace any current programs)

118 What if China can not overcome the [BIG] human capital challenge?
If human capital does not rise, will China stop growing? What happens if there are two distinct classes … haves and have nots … and China’s growth slows? What happens if there are: 200 million or more unemployed? 80 million unmarried? [read off slide] There will only be two choices for the unemployed in China (they will NOT be able to cross the border into a neighboring rich country) … they will either seek employment in the informal economy OR seek refuge in organized crime [this is NOT new in Chinese history] 118

119 I hope that we can choose “Optimism”
“there is exactly enough time … starting now!” But, the time is now … the clock is ticking!

120 Thank You! http://reap.stanford.edu
120


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