Chapter 8 - human capital education and health in economic development Flashcards
Why are health and education important objectives of development?
- reflected in Amartya Sen’s capabilities approach, and in the core values of economic development
- both are included as key indicators in the New HDI, MPI (multidimensional poverty index), and living standards
Why are health and education components (inputs) of growth and development?
- education helps developing countries adopt new technology and grow independently
- health improves productivity, and education depends on good health for success
- both serve as key inputs to economic growth, playing a dual role as both outputs and inputs in development
global health and education have made significant progress, but challenges remain due to
inequalities in developing countries
child mortality in developing nations
remains over 10 times higher than in wealthier countries due to preventable issues like dehydration caused by diarrhea
education access is also uneven. while citizens in developed regions receive over 12 years of schooling on average, those in sub-Saharan African and South Asia average
less than 6 years
the “voices of the poor” highlight the
real-life impact of these health and education disparities on people’s lives
do you think health and education are connected in development?
- health and education are investments in the same individual
- good health improves school attendance and learning, while longer, healthier lives increase the value of education
- as a result, health and education are closely linked to development
how health improves education
- health improves school attendance
- healthier students learn more effectiveley
- longer life spans increase the return on education investments
how education improves health
- public health programs rely on knowledge gained in school
- schools teach basic hygiene and sanitation
- education is essential for training health personnel
is increasing income sufficient to improve health and education?
NO! while higher income enables people and governments to invest more in health and education, focusing only on income is not enough
why?
- better health and education lead to higher productivity and income
- however, increase in income alone doesn’t guarantee better investments in children’s education or health
- therefore, development policy needs to focus on income, health, and education simultaneously
studies show that
- higher income doesn’t always improve nutrition, as spending may go toward non-essentials or diverse foods instead of needed calories ~ policies that increase income without guiding spending may fail to improve health or development
- market forces alone won’t solve this issue because families might make choices that limit their children’s health improvements
- seasonal price fluctuations and lack of proper nutrition prevent income from fully addressing health needs
- better educated mothers tend to have healthier children at any income level
- deworming of parasite infected children in Kenya improved school attendance ~ it also had positive spillover effects, reducing infections in neighboring school districts and among adults, which improved labor productivity
the human capital approach
- sees education and health as investments that increase productivity and income
- like physical investments, they generate future returns, which can be compared to their costs
- beyond economic benefits, education and health empower people to make decisions, engage in society, and have more control over their lives
- in developing countries, human capital investments have a strong impact ~ for example, in Venezuela, individuals with higher education earn more over their lifetime, despite starting work later
- the value of these investments depends on comparing future income gains with direct (tuition, books, uniforms) and indirect (lost income) education costs
figure 1
higher education leads to higher earnings
- individuals with university degrees have the highest income over time. although they start working later, around age 25, their income grows quickly and surpasses all other groups
- in contrast, people with no education earn the least throughout their lives, with slow income growth that stays far below those with higher education
- while university graduates face initial costs due to delayed earnings, the long-term financial benefits are significant
which level of education - primary, secondary, or higher - yields the highest return on investment? (looking at table 1)
primary!
- both social and private returns are highest for primary education in Sub-Saharan Africa, Asia, Latin America, and globally
- in OECD countries, returns across all education levels are lower, reflecting that more developed economies gain smaller incremental benefits from education compared to developing regions
- globally, primary education provides the highest return, highlighting the importance of investing in universal primary education
if education is the key to success, why do the highest returns on education investment globally come from primary education rather than higher education?
- primary education offers the highest return globally because it provides both high social returns (benefits to society) and private returns (benefits to individuals)
- it boosts productivity, benefits society, and increases individuals’ earnings while keeping costs low for both society and individuals
- in developing countries, as students move to higher levels of education, the social cost (the cost shared by individuals and society) rises quickly due to more expensive resources like building and subsidies
- however, the private cost (cost paid by individuals) increases more slowly, encouraging more people to pursue higher education, even though it may not always bring the biggest societal benefits
child labor
- imagine being forced to work before 15 in harmful jobs - this is the reality of child labor, with children as young as 11 are pushed into dangerous work
- in developing countries, child labor is common, especially in Africa and South Asia
- for many of these children, working means missing out on school and a chance at a better future
- they often suffer from poor health, with many facing physical stunting
- many of these children also face harsh and exploitative working conditions
in 2015, according to the international labor organization
- 152 million children were classified as child laborers
- 48% of these children were 11 years old or younger
- 73 million children were involved in hazardous work
- Africa and the Asia-Pacific region account for 90% of child labor, with most children working in agriculture
- many of these children face dangerous conditions, and around 22,000 children die each year due to work-related accidents
should child labor be banned?
- an immediate ban on all forms of child labor may not always benefit the child
- without work, children might face severe malnutrition, while with work, they can afford school fees, basic nutrition, and health care
- however, in some situations, banning child labor can be better for both the children and their families, according to the multiple equilibria model
child labor-multiple equilibria model
two key assumptions:
1. households with a sufficiently high enough income would not send its children to work
2. adults and children labor are substitutes: studies show adults are more productive than children, disproving the myth that children have special skills suited for certain jobs like carpet weaving
child labor as a bad equilibrium (figure 2)
- illustrates how could labor enters the labor market as wages fall, showing the shift from an adult-only workforce to one that includes both adults and children
- the vertical axis represents the wage level (denoted as w), showing the pay that both adults and children receive for their labor
- the horizontal axis shows the total labor supplied, combining the work of both adults and children
- AA’ represents the supply curve of adult labor only which is perfectly inelastic (vertical) ~ since all adults are assumed to work, regardless of the wage level, the supply curve of adult labor is vertical - meaning the adult labor supply doesn’t change as wages fluctuate
- TT’ represents the combined supply of all labor (adults + children) ~ if the wage falls enough that all children start working, the total labor supply shifts from just adult labor at AA’ to the combined labor at TT’
- the demand curve for labor shows that as wages decrease, the demand for labor increases ~ this is standard in economics: businesses will want to hire more workers when wages are low
- wE1 is the wage at the first equilibrium point E1, where only adults work ~ the wage level is high enough that families do not need to send their children to work
- wE2 is the wage at the second equilibrium point E2, where both adults and children work ~ the wage level is low enough that families must send their children to work to survive
- the blue S-shaped curve shows how labor supply changes as more children begin to work when wages fall ~ as wages fall from wH to wL, families start sending their children to work
- initially, when wages decrease from wH to wL, only a few children start working because most families can still manage without sending them to work
- however, as wages continue to drop, more families are forced to send their children to work, causing the curve to flatten as more children join the workforce
figure 2 summary
- when wages are above wH, the supply follows the line AA’
- when wages are below wL, the supply follows the line TT’
- between wH and wL, the S-shaped curve represents an increase child labor as wages fall
should child labor be banned?
- it depends on how sensitive the demand for labor is to wage changes
- for instance, if labor demand is inelastic (less sensitive to wage changes), we could have two possible outcomes or equilibria
~ E1 (good equilibrium): high wages, no child labor
~ E2 (bad equilibrium): low wages, with child labor - banning child labor reduced the total amount of labor available causing wages to rise and shifting the economy from E2 to E1 without significantly reducing labor demand
- this benefits families but employers may now be worse off, because they have to pay a higher wage
- thus, employers may use political pressure to prevent enactment and enforcement of child labor law
- in contrast, if labor is elastic (more sensitive to wage changes), there will be only one equilibrium, E1 or E2
- with an elastic demand curve, wage changes cause large shifts in labor demand which eliminates the possibility of two stable equilibria because the economy will quickly settle at either E1 and E2
- in contrast, in the inelastic case, wages do not adjust significantly, allowing two equilibria E1 and E2 to exist together
- banned child labor at E2 reduces labor supply
- with elastic labor demand, if wages rise due to a worker shortage, employers cut jobs or reduce hours because they are sensitive to such price changes, leaving families worse off
- as a result, families might get around the ban by sending children to work informally or under the table
- a ban can be effective, but only if the economy moves to a higher-wage equilibrium like E1
if banning child labor isn’t always practical or effective, what other policies could help families avoid relying on child labor?
4 main approaches to child labor policy in development
1. poverty reduction
- child labor is an expression of poverty, so the focus is on reducing poverty rather than directly targeting child labor (world bank approach)
2. encouraging school attendance
- this includes expanding school access by building new schools and using conditional cash transfer programs (ex: progresa in Mexico) to incentivize parents to send their children to school
- it is more effective than compulsory education alone
3. regulation and protection
- child labor may be inevitable in the short term. regulate child labor to prevent abuse and provide support services for child workers and their families (UNICEF approach)
4. banning child labor
- the ILO advocates for banning child labor, particularly its worst forms, such as slavery, trafficking, and dangerous work. while progress has been made, it has been slow
- in the meantime, other policies, such as poverty reduction and encouraging school attendance, can help families avoid relying on child labor where a full ban isn’t yet feasible
the gender gap: discrimination in education
- young females receive less education than young males in most low-income developing countries especially in Africa and South Asia
- women also make up a minority of college students in many low and middle income countries
- gender inequalities in school completion are common, particularly in rural areas
figure 3 youth literacy rate in 2016
higher literacy in males in middle East and North Africa, South Asia, and Sub-Saharan Africa
the gender gap: discrimination in education
- studies show that educational discrimination against women hinders economic development and reinforces social inequality
- closing the gender gap in education is beneficial for three main reasons:
1. the rate of return on women’s education is higher than men’s in most developing countries - this is because fewer girls are enrolled in school, so the next girl to enroll is likely to be more talented or motivated, making the investment in her education yield a higher return compared to boys
2. educating women increases workplace productivity and earnings, raises labor force participation, delays marriage, lowers fertility, and improves child health and nutrition (even without extra income)
3. since women bear a larger burden of poverty, improving their education helps break the cycle of poverty, improving their education helps break the cycle of poverty and inadequate schooling
the gender gap: discrimination in health
- in developing countries, girls often face healthcare discrimination, especially in places like South Asia, where sick boys are more likely to be taken to a health care center than girls
- women also face restrictions on reproductive rights
- health spending is usually higher for men than for women, and in places like Nigeria, husbands often make healthcare decisions for their wives
consequences of gender bias in health and education
- studies from developing countries show that educating girls provides one of the highest returns on investment, higher than most public infrastructure projects
- the global cost of not educating girls is estimated at $92 billion a year, this highlights that discrimination against girls in education is not only unfair but also very costly for development goals
- educating girls is also one of the most cost-effective ways to improve health standards
- the consequences of gender bias explain the “missing women” mystery
- Amartya Sen concludes that over 100 million women are missing globally due to practices like gender-selective abortions and healthcare neglect
- cultural norms in parts of Asia often favor boys because they are seen as future economic providers, helping their parents in old age and receiving dowries when they marry
- in contrast, girls are viewed as a financial burden since their families may need to pay dowries, and once married, they move to their husband’s family and take care of his parents instead of their own
- as a result, families tend to invest more in sons than in daughters, providing them with better healthcare and education
figure 4: estimated percentage of women “missing”
- shows percentage of missing women in countries
- highlights how women are underrepresented due to gender-selective practices, healthcare neglect, and cultural norms that prioritize boys over girls
- the gender bias is particularly severe in India, Pakistan, and China compared to Sub-Saharan Africa
disease burden: health challenges faced by developing countries
- developing countries face a severe disease burden, especially from infectious diseases
- although death may be attributed to dehydration or infection, malnutrition often plays a key role
for instance:
- in 2018, the International Food Policy Research Institute (IFPRI) reported
that globally
~ over 150 million children were stunted, and 50 million were wasted, with malnutrition causing lifelong impairments
~ also, 124 million people were suffering from acute hunger—a 55% increase from 2016
– in 2019, the United Nations World Food Program estimated 821 million people were hungry globally
– UNICEF’s 2019 report found that over half of all children under 5 globally suffer from “hidden hunger” due to nutrient deficiencies, and nearly 200
million children are stunted or wasted
- although child hunger has declined since 1990, achieving the SDG of ending hunger by 2030 remains a challenge
examples:
- AIDS
- malaria
- TB
- pneumonia
- hepatitis B
- leprosy
health and productivity
- poor health not only impacts child mortality but also reduces adult productivity in developing countries
- Studies show that healthier people earn higher wages
- For example:
~ in Bangladesh and India, healthier workers secure better-paying jobs, and improving health conditions like leprosy significantly raises earnings
~ Robert Fogel found that better health leads to increased height, which in turn is linked to higher earnings. In Brazil, a 1% increase in height leads to a 7% wage rise. - thus, improved health and nutrition boost productivity, especially for the poorest and least educated
some problems of developing country health systems
- health facilities are fewer and often in poor condition compared to developed countries
- high patient-to-doctor and patient-to-nurse ratios result from inadequate health personnel
- per capita public spending on health care is much lower in developing countries
- many traditional medical practitioners, such as herbalists, provide services in developing countries
- health services are unevenly distributed, with rural areas typically lacking centers and personnel
conclusion
- health and education are crucial for economic development, both for increasing incomes and improving well-being
- however, many developing countries face challenges like child labor and disease, and improvements in these areas don’t always follow income growth
- market failures and poor government policies can worsen inequality in education and healthcare
- therefore, better government policies are essential to address these issues and promote social progress
