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: