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Lecture 11
Human Capital:
Education and
Health in
Economic
Development
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 selfesteem（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, onthe-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
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