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Human Capital: Education and Health in Economic Development

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328 views33 pages

Human Capital: Education and Health in Economic Development

Uploaded by

Ivan Pacheco
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Chapter 8

Human Capital:
Education and
Health in
Economic
Development

Copyright © 2009 Pearson Addison-Wesley. All rights reserved.


Development & Human Capital

• Health and education are investments in


human capital to improve labor productivity

• Investment in human capital is a major


determinant of growth and development

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-2


Development & Human Capital

• Investment in health increases the return to


investment in education

• Investment in education increases the return


to investment in health

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-3


Development & Human Capital

• Economic growth would not lead to substantial


increases in investment in children’s education
and health

• Better educated mothers tend to have educated


and healthy children

• Market failure in education and health requires


policy action

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-4


Determinants of Education Demand

• Wage or income differential paid to workers


with various levels of education

• Probability of success in finding a job in the


formal sector

• Direct private cost of education (e.g., tuition)

• Indirect or opportunity cost of education (i.e.,


foregone income)
Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-5
Return of Investment in Education

• Initial investments in education lead to a


stream of higher future income

• The present discounted value of this stream


of future income is compared to the cost of
education

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-6


The Economics of Education

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-7


Age-earnings Profiles by Level of
Education: Venezuela, 1989

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-8


Child Labor in LDCs

• Some 120 million children work full-time

• Some 150 million children work part-time

• Of these 250 million working children


– 61% or 153 million in Asia
– 32% or 80 million in Africa
– 7% or 17 million in Latin America

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-9


Child Labor in LDCs
• Child labor is a common practice in LDCs
labor markets

• The problem may be modeled using the


“multiple equilibria” approach

• Government intervention is needed to move


to a ‘better’ equilibrium

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-10


Market for Child Labor

Adult Labor Supply Adult & Child Labor


A T Supply
Wage • At WE1 labor supply is AA’
• As children enter the market, wage falls
• At WL adult and child labor supply is TT’
WE1 E1 • At WE2, OA’ of adult and A’T’ children
WH are employed; a ban on child labor
B
WL C • moves E2 to E1
The S-shaped curve is supply of child
WE2 E2 labor between these wages: E1BCE2

A’ T’ Demand for Labor

Employment

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-11


The Education Gender Gap

Females receive less education than males in LDCs. To close the gap

• The rate of return on education is higher for female than male

• Female education increases productivity and lowers fertility

• Educated mothers raise educated children

• Female education helps break the vicious cycle of poverty and


inadequate schooling for women

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-12


Male and Female Education
Rates, 2004

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-13


The Education Gender Gap

Consequences of gender bias in health and


education

• Economic incentives

• Cultural setting

• Increase in family income does not always


lead to better health and education
Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-14
Social vs. Private Returns of Education

• Social and private returns of education are


higher in LDCs than MDCs

• Private returns are higher than social returns

• Social and private returns are higher for


primary than secondary and higher
education

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-15


Rate of Return to Investment in
Education

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-16


Optimal Level of Education

• Optimality criterion for education: maximum


difference between returns and costs

• Social: the optimal level of education is “primary”


where costs are subsidized and returns are high

• Private: the optimal level of education is “higher”


where costs are heavily subsidized and returns are
very high

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-17


Social Costs & Returns

Costs/Returns Social Returns

Social Costs
Tertiary

Secondary
Primary
Public decision: Invest in primary education

Years of schooling completed

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-18


Private Costs & Returns

Private Returns
Costs/Returns

Tertiary Private Costs


Secondary
Primary

Private decision: Invest in higher education

Years of schooling completed

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-19


Education and Development

• Distribution of education
– Lorenz curves for the distribution of education

• Education Inequality and Poverty

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-20


Lorenz Curves for Education
in India and South Korea, 1990

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-21


Gini Coefficients for Education in
85 Countries, 1990

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-22


Health-Care and Development

Measurement and distribution

• Life expectancy at birth


• Child mortality
• Malnutrition and hunger

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-23


Life Expectancy in World Regions

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-24


Under-5 Mortality Rates in Various
World Regions

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-25


Proportion of Children under 5 Who Are
Underweight, 1990 and 2005

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-26


Deaths of Children under Age 5

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-27


Children’s Likelihood to Die in LDCs

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-28


Regional HIV and AIDS Statistics,
2006

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-29


Health-care and Development

• Disease burden
• HIV/AIDS infection
• Malaria
• Parasitic Worms and Other “Neglected
Tropical Diseases”

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-30


The Major Neglected Tropical Diseases,
Ranked by Prevalence

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-31


Health Systems and
Development
• Health and Productivity
– Is there a connection?

• Health Systems Policy


– Great variability in the performance of health
systems at each income level

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-32


GNI per Capita and Life
Expectancy at Birth, 2002

Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-33

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