The following will be discussed in this chapter: budget constraint, indifference curve, properties of indifference curve, optimal choices, income effect on consumer choice, price effect on consumer choice, income and substitution effect.
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 Addison Wesley. All rights reserved 82 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 83 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 Copyrightâ2009PearsonAddisonư Wesley.Allrightsreserved 8ư4 Determinants of Education Demand ã 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., Copyright © 2009 Pearson Addison foregone income) Wesley. All rights reserved 85 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 86 The Economics of Education Copyright © 2009 Pearson Addison Wesley. All rights reserved 87 Age-earnings Profiles by Level of Education: Venezuela, 1989 Copyright © 2009 Pearson Addison Wesley. All rights reserved 88 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 89 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 810 Private Costs & Returns Private Returns Costs/Returns Secondary Tertiary Private Costs Primary Private decision: Invest in higher education Years of schooling completed Copyright © 2009 Pearson Addison Wesley. All rights reserved 819 Education and Development • Distribution of education – Lorenz curves for the distribution of education ã Education Inequality and Poverty Copyrightâ2009PearsonAddisonư Wesley.Allrightsreserved 8ư20 Lorenz Curves for Education in India and South Korea, 1990 Copyright © 2009 Pearson Addison Wesley. All rights reserved 821 Gini Coefficients for Education in 85 Countries, 1990 Copyright © 2009 Pearson Addison Wesley. All rights reserved 822 Health-Care and Development Measurement and distribution • Life expectancy at birth • Child mortality • Malnutrition and hunger Copyright © 2009 Pearson Addison Wesley. All rights reserved 823 Life Expectancy in World Regions Copyright © 2009 Pearson Addison Wesley. All rights reserved 824 Under-5 Mortality Rates in Various World Regions Copyright © 2009 Pearson Addison Wesley. All rights reserved 825 Proportion of Children under Who Are Underweight, 1990 and 2005 Copyright © 2009 Pearson Addison Wesley. All rights reserved 826 Deaths of Children under Age Copyright © 2009 Pearson Addison Wesley. All rights reserved 827 Children’s Likelihood to Die in LDCs Copyright © 2009 Pearson Addison Wesley. All rights reserved 828 Regional HIV and AIDS Statistics, 2006 Copyrightâ2009PearsonAddisonư Wesley.Allrightsreserved 8ư29 Health-care and Development ã Disease burden • HIV/AIDS infection • Malaria • Parasitic Worms and Other “Neglected Tropical Diseases” Copyright © 2009 Pearson Addison Wesley. All rights reserved 830 The Major Neglected Tropical Diseases, Ranked by Prevalence Copyright © 2009 Pearson Addison Wesley. All rights reserved 831 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 832 GNI per Capita and Life Expectancy at Birth, 2002 Copyright © 2009 Pearson Addison Wesley. All rights reserved 833 ... Wesley.Allrightsreserved 8ư2 Development & Human Capital ã Investment in health increases the return to investment in education • Investment in education increases the return to investment in health Copyright © 2009 Pearson Addison.. .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. .. 83 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