CHAPTER 1©E.Wayne Nafziger Development Economics 1 Chapter 10 Education, Health and Human Capital

CHAPTER 1 ©E.Wayne Nafziger Development Economics1

Chapter 10

Education, Health and Human

Capital


Education, Health & Human Capital

Since Abraham Lincoln and John Henry, humankind has denigrated manual work and put a premium on intellectual work.


T.W. Schultz (1964) argues: Capital goods are always treated as produced

means of production. But in general the concept of capital goods is

restricted to material factors, thus excluding the skills and other capabilities of man that are augmented by investment in human capital.

The acquired abilities of a people that are useful in their economic endeavor are obviously produced means of production and in this respect forms of capital, the supply of which can be augmented.


What are the benefits of LDC education?


Economic returns to education Education increases productivity and

improves health & nutrition. Average returns to education in LDCs >

average returns to physical capital. Psacharopoulos and other World Bank

researchers show returns to primary education highest.




What are the flaws of Psacharopoulos et al.’s research

Marginal rates of return for primary education lower than secondary education (Knight et al.).

After rapid educational expansion, primary completers, in the 1990s, can’t get menial blue-collar jobs.

Primary graduates “filter down” into lesser jobs, with lower rates of return.


Premium for higher education/primary education

Highest in Africa, where university graduates scarce.


Non-economic benefits of education

Consumer goods component

1. Enriching life.

2. Making friends.

3. Understanding self & world. Demand continues even when economic

returns are 0 or less.


Education as screening

Certification of an individual’s productive qualities.

In some LDCs, education rations access to inflated salaries.

Preferable though to other methods of selection.


Is primary education beneficial for small-scale agriculture?

World Bank: education and literacy pays off in LDC small-scale agriculture.

Benefits of primary education – setting of long-term goals, keeping records, estimating past & future returns, & reading to obtain & evaluate information about changing technology.


Study by Boissiere, Knight & Sabot in Kenya & Tanzania

Earnings increases with greater literacy & numeracy in manual & nonmanual jobs.

Cognitive skills discovered on job by employer who pays wage premium.

Increased reasoning ability does not increase earnings!

Learning school lessons affects performance & earnings in work.


Education & Equality Most effective way to reduce inequality is

making public (especially primary) education available & free.

Rural children, poorest urban children, girls benefit most from primary education expansion.

In low-income countries, primary education of girls 69% compared to 79% for boys; sub-Saharan Africa 56% to 64%; South Asia 72% to 86%..



Links between parental education,

income, & children’s educational quality

Public primary education, disproportionately subsidizing poor, but still costs poor to attend.

Access to secondary & higher education correlated with parental income & education.


Tanzania’s effort to limit secondary education relative to primary education to make education more equitable backfired

Rich sent children to private primary schools, increasing their ability to score high on the primary certificate exam and thus their likelihood of entering secondary school, especially a high ranking one.



Secondary & Higher Education

Severe shortages of skilled people. More on-the-job training. Charge tuition for higher-income

youths. Scholarships for lower-income youths.



Education via electronic media

Mauritania (3 million people) uses distance learning (University of Nouakchott teleconferencing & internet through African Virtual University & North America).

World Bank: Africa Live Data Base, Connectivity for the Poor; Global Distance Learning Network; African Virtual University – emphasis on science, engineering, & continuing education via satellite.


Other topics in the book

Planning for specialized education & training.

Achieving consistency in planning educated people.

Vocational & technical skills. Socialization & motivation.


Reducing brain drain

Foreign born with US degrees: 40% computer science, 35% engineering, 28% mathematics 1999.

US federal government: 16% of Ph.Ds born overseas; 19% state & local government.

Africa has lost 1/3 of skilled professionals, mainly to DCs, in recent years.


Does the brain drain hurt LDCs?

Borjas: US immigrants educated abroad do not receive their marginal product as wages, thus importing free human capital to US.

Grubel-Scott: Incomes of those born in LDCs increases with emigration.

Baldwin: overflow of high-level persons otherwise underutilized.


But . . . LDCs subsidize schooling. LDC labor markets monopsonistic (one

buyer), thus meaning LDCs lose more output than income from emigration.

High level persons increase productivity of other production factors.

LDCs can encourage students to take relevant programs.


Policies Scholarships within country or those

abroad only for relevant programs. Study in another LDC. Research in universities abroad under

supervision of local scholar. Temporary salary to foreign educated

graduates in job searches. Eliminate discriminatory barriers to

highly educated nationals returning.


Health & physical condition World Health Organization, World Health

Report (2003:5) states:

Global health is a study in contrasts. While a baby girl born in Japan today can expect to live for about 85 years, a girl born at the same moment in Sierra Leone has a life expectancy of 36 years. The Japanese child will receive vaccinations, adequate nutrition and good schooling. . . . Meanwhile, the girl in Sierra Leone has little chance of receiving immunizations and a high probability of being underweight throughout childhood.


Health in DCs & LDCs

Japanese person (on average) receives $550 yearly of medications & Sierra Leonean $3.

Millennium Development [health] Goals require health promotion, disease prevention, treatment for acute illness & chronic care, response to new threats from diseases & injuries, & primary health care system (WHO 2003:5-6).


Relation between health & income Health & economic development 2-way

relationship. Except for Africa, 1995-2003, life expectancy

gains in all world regions since the 1930s. Bad health & poor nutrition contribute to low

labor productivity, physical suffering, & mental anguish.

Malnourishment mostly a problem among the poor.


Causes of 57 million deaths (2002) 17 million stroke & heart disease. 7 million cancer. 3.8 million respiratory infections. 2.8 million HIV/AIDS. 2.4 million conditions at birth. 1.8 million diarrhoeal diseases, 1.6 million

TB, 1.3 million measles, 1.2 million malaria, 0.4 million malnutrition related, 18 million other.


Populations with highest risk of deaths

Children younger than five (18%), of which virtually all are from Africa & other LDCs,

Primary contributors are malnutrition, infectious & parasitic diseases, conditions at birth, diarrhoeal diseases, & malaria.

Girls lower mortality (except where preferential health care & nutrition for boys).

Children from bottom 20% by income.



AIDS

20 million died, 1981-2002 (worldwide).

Most of 40 million with HIV will die at least 10 years prematurely.

28 of 40 million with HIV/AIDS in sub-Saharan Africa.


AIDS in sub-Saharan Africa

9% prevalence ages 15-49 years. Highest among urban high-income,

skilled men & their partners. Women 58%

- Dependent on partners for economic security; little power in sexual relationships.

- Little power to resist risky sex.


AIDS in sub-Saharan Africa Costs: per capita income declines 0.5-1.2%

yearly from AIDS. Health care costs, reduced savings, loss of

skilled adults (especially teachers) in prime, reduced productivity, orphans, etc.

> 20% of southern African adults HIV-positive (2001).

Botswana’s life expectancy with AIDS in 2010 projected as 27 compared to 74 without AIDs (Lamptey et al. 2002).


How to reduce suffering from AIDS Chemotherapy & antiretroviral drugs (but

expensive without generic drugs available). UNAIDS, Gates & Clinton Foundations. Preventive measures: education on safer sex,

promotion of condom use, prevention & treatment of sexually transmitted diseases cost effective.

Brazil mandated universal free access to HIV drugs.

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CHAPTER 1©E.Wayne Nafziger Development Economics 1 Chapter 10 Education, Health and Human Capital