4 Education

4 Education and Human Capital Formation

Education

• 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.

TECHNICOLOGICAL DEV 

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.

NEED INVESTMENT.

Investment

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:

• …