1. Human Capital: Education and Health in Economic Development
Chapter 8
Human Capital: Education and Health in Economic Development

2. The central roles of education and health
Health and education are important objectives of development.
Health and education are inputs in the aggregate production function
(i.e. GDP) like other traditional factors of production.
Health is a prerequisite for increases in productivity.
Education improves a nation’s ability to develop / absorb modern
technology.

3. Education and health as joint investments for development.
Greater health capital may raise the return on education investment:
Health is an important factor in school attendance.
Healthier children learn more efficiently and become more successful.
Healthier individuals are more able to productively use their education.
Longer life spans raise the return to investment in education.
Success of health programs rely on skills learned at school.
Schools teach basic personal hygiene and sanitation

4. Improving health and education: Why increasing incomes is not sufficient
Causality between income and human capital runs in both directions:
With improved health and education standards, higher productivity
and incomes are possible.
Development policy should focus on income, health, and education
simultaneously.
Human capital includes education, health, and other human
capacities that can raise productivity when increased.

5. Figure 8.1: Age-earnings profiles by level of education: Venezuela (1989)

6. Figure 8.2: Financial trade-offs in the decision to continue in school

7. Child Labor Child labor is a widespread problem in developing world:
Labor time disrupts children’s schooling or prevents children from
attending school.
Health of child workers is significantly worse than non-working children.
Working children are subject to harsh and exploitative conditions.

8. Child Labor Four main approaches to child labor policy:
World Bank approach:
Child labor is an expression of poverty.
Focus on eliminating poverty rather than directly addressing child
labor.
Education approach:
Strategies to get more children into school.
Expanded school places (i.e. village schools) and cash transfer
incentives to parents.

9. Child Labor Four main approaches to child labor policy:
UNICEF approach:
Child labor is inevitable in the short run.
Alleviating measures such as regulation to prevent abuse and
provision of support services for working children.
Ban child labor where possible.
At least prohibit the most abusive forms (i.e. drug trafficking).

10. The gender gap: women and education
Educational gender gap can be measured in terms of male-female:
Adult literacy rates.
Gross enrollment indices.
Closing the educational gender gap is desirable because:
Rate of return on women’s education is higher than that of men
(developing country data).
Higher female productivity, greater labor force participation, later
marriage, improvements in child health and nutrition.
Improved child health and more educated mothers create a
multiplier impact on the quality of a nation’s human resources.

11. Table 8.2: Male and female education rates (2004)

12. Educational Systems and Development
The amount of schooling received is determined by the
conditions of educational supply and demand:
Two major influences on schooling demand.
- Higher earning potential.
- Direct and indirect costs of education.

13. Educational Systems and Development
The amount of schooling demanded is related to:
Wage/income differential between rural and urban jobs.
Probability of success in finding modern sector employment.
Direct private costs of education.
Indirect opportunity costs of education.

14. Figure 8.5: private versus social benefits and costs of education: an illustration.

15. Educational Systems and Development
Private individual maximizes the difference between expected
private benefits and private costs:
Optimal strategy  maximize years of schooling.
Public planner maximizes the difference between social returns
and social costs.
Optimal strategy  provide B years of schooling.

16. Educational Systems and Development
Distribution of education.
Lorenz curves for the distribution of education.
Education Inequality and Poverty.

17. Figure 8.6: Lorenz curves for education in India and South Korea (1990)

18. Figure 8.7: Gini coefficients for education in 85 countries (1990)

19. Educational Systems and Development
Educational supply and demand: the relationship between
employment opportunities and educational demands.
Social versus private benefits and costs.
Distribution of education.
Education, internal migration, and the brain drain.

20. Health Systems and Development
Education, inequality, and poverty.
WHO (World Health Organization) defines health as a “state
of complete physical, mental, and social well-being and not
merely the absence of disease or weakness”
Measurement of health:
Life expectancy.
Under-5 child mortality rates.

21. Figure 8.8: Life expectancy in various World regions.

22. Figure 8.9: Under-5 mortality rates in various World regions

23. Health Systems and Development
Distribution of Health
Average health levels may conceal inequalities in the distribution
of health across the society.
Minorities and indigenous populations have shorter life
expectancy than the dominant groups.
Infant mortality among minority groups are larger than national
averages.

24. If you don’t have money today, your disease will take you to your grave.
- An old woman from Ghana
The children keep playing in the sewage.
- Sacadura, Brazil
In the hospitals, they don’t provide good care to the indigenous people like they
ought to; because of their illiteracy they treat them badly…
- A young man from Ecuador
The school was Ok, but now it is in shambles; there are no teachers for weeks.
There is no safety and no hygiene.
- Pakistan (voice of the poor)
Before everyone could get health care, but now everyone just prays to God that
they don’t get sick.
- Bosnia, Herzegovina

25. Health Systems and Development
Health systems (promote, restore, or maintain health) include:
Public health departments.
Hospitals and clinics.
Offices of doctors and paramedics.
Informal network of traditional healers.

26. Figure 8.11: Children’s likelihood to die in selected countries

27. Health Systems and Development
Disease burden.
HIV/AIDS.
Malaria.
Parasitic Worms and Other “Neglected Tropical Diseases”.

28. Table 8.4: The major neglected tropical diseases, ranked by prevalence

29. Figure 8.12: Proportion of children under 5 who are underweight (1990 and 2005).

30. Figure 8.14: Wages, education, and height of males in Brazil and the United States.