Lecture 11 Human Capital: Education and Health in Economic Development

Lecture 11

Human Capital: Education and Health in Economic Development

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11.1 The Central Roles of Education and Health

• Health and education are important objectives of development, as reflected in Amartya Sen’s capability approach, and in the core values of economic development

• To raise levels of living(发展目标之一，提高生活水平） , including, in addition to higher incomes, the provision of more jobs, better education, and greater attention to cultural and human values, all of which will serve not only to enhance material wellbeing but also to generate greater individual and national self-esteem（发展的核心价值之一）

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11.1 The Central Roles of Education and Health

• Functionings ： What people do or can do with the commodities of given characteristics that they come to possess or control.

• capabilities ： the freedom that a person has in terms of the choice of functionings, given his personal features (conversion of characteristics into functionings) and his command over commodities

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11.1 The Central Roles of Education and Health

• Health and education are also important components of growth and development – inputs in the aggregate production function

• Human Capital ： Productive investments embodied in human persons, including skills, abilities, ideals, health, and locations, often resulting from expenditures on education, on-the-job training programs, and medical care.

• Their dual role as both inputs and outputs gives health and education their central importance in economic development.

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the impact of deprivation in health and education on people’s lives（辍学儿童）

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the impact of deprivation in health and education on people’s lives（营养不良）

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Education and Health as Joint Investments for Development

• These are investments in the same individual• Greater health capital may improve the returns to

investments in education– Health is a factor in school attendance（健康影响入学）– Healthier students learn more effectively– A longer life raises the rate of return to education– Healthier people have lower depreciation of education

capital• Greater education capital may improve the returns to

investments in health– Public health programs need knowledge learned in school– Basic hygiene and sanitation may be taught in school– Education needed in training of health personnel

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Improving Health and Education: Why Increasing Incomes Is Not Sufficient

• Increases in income often do not lead to substantial increases in investment in children’s education and health 。 Howarth Bouis found that intake of vitamins A and C is not positively associated with income in the Philippines and argued that consumer education was important.

• But better educated mothers tend to have healthier children at any income level

• Significant market failures(spillover benefits) in education and health require policy action

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11.2 Investing in Education and Health: The Human Capital Approach

• Initial investments in health or education lead to a stream of higher future income

• The present discounted value of this stream of future income is compared to the costs of the investment

• Private returns to education are high, and may be higher than social returns, especially at higher educational levels

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Age-Earnings Profiles by Level of Education: Venezuela（委内瑞拉）

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Financial Trade-Offs in the Decision to Continue in School

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人力资本（教育）投资的现值

E is income with extra education, N is income without extra education, t is year, i is the discount rate, and the summation is over expected years of working life

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Sample Rates of Return to Investment in Education by Level of Education, Country, Type, and Region

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Effect of Education on Wages

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Share of Hours Worked by Education Level, 1940–2008

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Ratio of College Wages to High-School Wages(College Premium)

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Breakdown of the Population by Schooling and Wages

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Share of Human Capital in Wages in Developing and Advanced Countries

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How Much of The Variation in Income Across Countries Does Education Explain?

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11.3 Child Labor

• 215 million are classified as “child laborers "in 2008.

• http://blog.sina.com.cn/s/blog_51508bd70102dtub.html

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Child Labor as a Bad Equilibrium

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child labor policy

• 1. child labor as an expression of poverty and recommends an emphasis on eliminating poverty rather than directly addressing child labor; the World Bank

• 2. strategies to get more children into school, including expanded school places, such as new village schools, and conditional cash transfer incentives to induce parents to send their children to school

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child labor policy

• 3. child labor inevitable, at least in the short run, stresses measures such as regulating it to prevent abuse and to provide support services for working children 联合国儿童基金会

• 4. banning child labor.ILO

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11.4 The Gender Gap: Discrimination in Education and Health

• Young females receive less education than young males in nearly every low and lower-middle income developing country

• Closing the educational gender gap is important because:– The social rate of return on women’s education is

higher than that of men in developing countries– Education for women increases productivity, lowers

fertility– Educated mothers have a multiplier impact on future

generations– Education can break the vicious cycle of poverty and

inadequate schooling for women

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Youth Literacy Rate, 2008

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11.4 The Gender Gap: Discrimination in Education and Health (cont’d)

• Consequences of gender bias in health and education

• interlinked nature of Economic incentives and their cultural setting（女儿是赔钱货，受更多教育的女孩嫁不出去。白富美为何都成剩女了？）– “Missing Women” mystery in Asia（根据全国第六次人口普查公报显示：新生男女比例达到 108 ： 100。80后是 111 ： 100，未来 10年这个比例还将继续扩大，将会有近 3000万男人找不到老婆；发达国家该比例约为95:100）

• Increase in family income does not always lead to better health and education

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Female-Male Ratios in Total Population in Selected Communities

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剩男剩女等级与年龄构成

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11.5 Educational Systems and Development

• the amount of education demanded largely determines the supply

• 四个影响教育需求的主要因素： the wage or income differential, the probability of success in finding modern-sector employment, the direct private costs of education, and the indirect or opportunity costs of education

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11.5 Educational Systems and Development

• 1. The modern-traditional or urban-rural wage gap is of the magnitude of,say, 100% for secondary versus primary school graduates.

• 2. The rate of increase in modern-sector employment opportunities for primary school dropouts is slower than the rate at which such individuals enter the labor force. The same may be true at the secondary level and even the university level in countries such as India, Mexico, Egypt.

• 3. Employers, facing an excess of applicants, tend to select by level of education.

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11.5 Educational Systems and Development

• 4. Governments, supported by the political pressure of the educated, tend to bind the going wage to the level of educational attainment of jobholders.

• 5. School fees decline at the university level as the state bears a larger proportion of the college student’s costs.

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Private versus Social Benefits and Costs of Education: An Illustration

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11.5 Educational Systems and Development

• To a large degree, the problem of divergent social versus private benefits and costs has been artificially created by inappropriate public and private policies with regard to wage differentials, educational selectivity, and the pricing of educational services.

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Educational Systems and Development

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

• Education, Inequality, and Poverty

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Lorenz Curves for Education in India and South Korea

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Gini Coefficients for Education in 85 Countries

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Education, Inequality, and Poverty

• educational systems of many developing nations sometimes act to increase rather than to decrease income inequalities

• positive correlation between level of education and level of lifetime earnings

• The private costs of primary education (especially in view of the opportunity cost of a child’s labor to poor families) are higher for poor students than for more affluent students, and the expected benefits of (lower-quality) primary education are lower for poor students.

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11.6 Health Measurement and Distribution

• measuring health with under-5 child survival rates and life expectancy.

• The latter measure has the advantage that it is available for most countries, at least as an estimate

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Life Expectancy in Various World Regions

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Life Expectancy versus GDP per Capita

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How Health Interacts with Income

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Effect of an Exogenous Shift in Income

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Health and Income per Capita: Two Views

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Under-5 Mortality Rates in Various World Regions

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Deaths of Children under Age 5

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Children’s Likelihood to Die in Selected Countries

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Proportion of Under-Five Children Who Are Underweight, by Household Wealth, around 2008

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

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Health, Productivity, and Policy

• Productivity– Is there a connection?

• poor health conditions in developing countries also harm the productivity of adults ： healthier people earn higher wages

• Robert Fogel ： stature is a useful index of the health 身高是健康的衡量指标

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Wages, Education, and Height of Males in Brazil and the United States

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Health, Productivity, and Policy

• Health systems include the components of public health departments, hospitals and clinics, and offices of doctors and paramedics（护理人员） . informal network includes traditional healers, who may use somewhat effective herbal remedies（草药） , or acupuncture（针灸）

• some developing countries’ health systems were far more effective than others in achieving health goals（下图）

• Health Systems Policy ： Great variability in the performance of health systems at each income level(WHO)

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GNI Per Capita and Life Expectancy at Birth, 2002