Chapter 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 AddisonWesley 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 AddisonWesley 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 AddisonWesley 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 AddisonWesley 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 AddisonWesley All rights reserved 8-6 The Economics of Education Copyright © 2009 Pearson AddisonWesley All rights reserved 8-7 Age-earnings Profiles by Level of Education: Venezuela, 1989 Copyright © 2009 Pearson AddisonWesley 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 AddisonWesley 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 AddisonWesley All rights reserved 8-10 Private Costs & Returns Private Returns Costs/Returns Tertiary Secondary Private Costs Primary Private decision: Invest in higher education Years of schooling completed Copyright © 2009 Pearson AddisonWesley 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 AddisonWesley All rights reserved 8-20 Lorenz Curves for Education in India and South Korea, 1990 Copyright © 2009 Pearson AddisonWesley All rights reserved 8-21 Gini Coefficients for Education in 85 Countries, 1990 Copyright © 2009 Pearson AddisonWesley All rights reserved 8-22 Health-Care and Development Measurement and distribution • Life expectancy at birth • Child mortality • Malnutrition and hunger Copyright © 2009 Pearson AddisonWesley All rights reserved 8-23 Life Expectancy in World Regions Copyright © 2009 Pearson AddisonWesley All rights reserved 8-24 Under-5 Mortality Rates in Various World Regions Copyright © 2009 Pearson AddisonWesley All rights reserved 8-25 Proportion of Children under Who Are Underweight, 1990 and 2005 Copyright © 2009 Pearson AddisonWesley All rights reserved 8-26 Deaths of Children under Age Copyright © 2009 Pearson AddisonWesley All rights reserved 8-27 Children’s Likelihood to Die in LDCs Copyright © 2009 Pearson AddisonWesley All rights reserved 8-28 Regional HIV and AIDS Statistics, 2006 Copyright © 2009 Pearson AddisonWesley 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 AddisonWesley All rights reserved 8-30 The Major Neglected Tropical Diseases, Ranked by Prevalence Copyright © 2009 Pearson AddisonWesley 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 AddisonWesley All rights reserved 8-32 GNI per Capita and Life Expectancy at Birth, 2002 Copyright © 2009 Pearson AddisonWesley All rights reserved 8-33 ... Inequality and Poverty Copyright © 2009 Pearson AddisonWesley All rights reserved 8-20 Lorenz Curves for Education in India and South Korea, 1990 Copyright © 2009 Pearson AddisonWesley All rights... education helps break the vicious cycle of poverty and inadequate schooling for women Copyright © 2009 Pearson AddisonWesley All rights reserved 8-12 Male and Female Education Rates, 2004 Copyright... schooling completed Copyright © 2009 Pearson AddisonWesley All rights reserved 8-18 Private Costs & Returns Private Returns Costs/Returns Tertiary Secondary Private Costs Primary Private decision: