Stuck in the Middle? Human Capital Development and Economic Growth

in Malaysia and Thailand

Sustainable Economic Growth

• The role of human capital formation in the quest to sustain economic growth

• Good education system is fundamental to equip workers with market skills

• Focus on Malaysia and Thailand

Middle Income Trap

If a country reaches a certain level of living standard but grow rate lose momentum, it may be in “middle-income trap” and would not advance to high-income status.

Role of education in economic growth

- Output depends upon both quantity and quality of human capital

-Human capital is endogenous

-Positive association between test score and economic growth

What types of skills might middle income countries require to maintain momentum?

A system stresses “STEM”

S- ScienceT- TechnologyE- EngineeringM-Mathematics

Creating a robust middle class is crucial for long-term growth.

Middle class and long-term economic growth

Case studies

Quality of education

Economic Benefits of human capital

Private – Better jobs, higher wages

Social – Technology change and diffusion, health and life expectancy

Rate of return:The rate of return to each year of additional schooling in Thailand is more than double compared to Korean and Singapore which reflect the scarcity of skilled workers.

- Set budget priorities

- Reward teacher appropriately

- Avoid inflexible tracking of students

- Provide autonomy with accountability

- Invest in early childhood development

- Finance higher education appropriately

Education and the Options for Growth Prospects

Thanks