4 Education

HideShow resource information

4 Education and Human Capital Formation


  • A driver for growth and a prerequisite for increasing productivity.
  • simultaneously an input and an output of developmnet.
  • Health and education are some basic objectives for development.
  • Vital components of growth and development.


PHYSICAL CAPITAL           >>>>>>>>>> Economic Growth

HUMAN CAPITAL: skills and knowledge. Healthcare and education improve this.

Income is not enough to produce growth as we see: higher income does not cause better nutrition. Likewise, education and health do not equal growth >>> human capital does not = growth.



People invest if they predeict or see positive returns, even if the may take a long time to achieve. So what determines investment in education?

  • Opportunity cost of schooling instead of employing
  • long term private gains i.e. higher income with higher level of education.
  • Social returns: knowledge and skills can be passed on to others. Promotes innovation and growth. 
  • Very high private returns to education in poor countries.

Graph: positive correlation between income and years of education. Richer countries are better educated.

Private costs of education:

  • direct costs: school uniform, text books, transport, fees.
  • indirect cost: money lost from being iin school not work.
  • increased tax in order to improve education. Less disposable income.
  • training for teachers.

Private benefits of education:


No comments have yet been made

Similar Economics resources:

See all Economics resources »See all resources »