Education as Human Capital
Economics shows economic growth as dependant on investment in:
• physical capital: machines and infastructure
• Technological investment: innovation
• Human capital: investment in people: skills, knowledge, health (education, on job training,
healthcare)
Increase in income does not always lead to higher investment in human capital and education
Investing in education: the human capital approach
Education/healthcare = investment, gains are not felt at start, they increase over time (expect return in
future)
Present discount value: how to measure future gains in todays worth, compared to todays cost of.
I
. investment
Add diagram
Direct costs: school fees, textbooks, laptops
Indirect costs: opportunity costs (contribution to household production, money gained from.
f
. employment in that time)
Factors that in uence value of investment:
-job opportunities/rate of employment/likeliness of getting job (gender, ethnic disparities etc)
-current nancial situation (no disposable income, access. To credit/insurance)
-life expectancy
(Add graph rates of return of education) add formulas and research
In general, primary education has highest rate of return, as you go from no education to some (we
make the biggest jump in primary school). In developing countries (compared to developed) private
rate of returns are higher due to income di erence between those with less and more schooling is
greater on average.
Social bene ts: increased awarness (health/voting/citizenship etc)
Private bene ts: income gained from jobs that need education
High correlation between multidimensional poverty and education, as well as looking at gender.
p
. in uence (human development report 2020)
Education poverty trap: ?
Educational systems and Development
Assumption there is demand for education
Determinants for the demand for education:
-private bene ts of education (direct bene ts to individual)
-private cost of education(direct costs + indirect costs for individual)
Assumption: individuals invest till private bene t of additional investment=private cost of the addition
Economics shows economic growth as dependant on investment in:
• physical capital: machines and infastructure
• Technological investment: innovation
• Human capital: investment in people: skills, knowledge, health (education, on job training,
healthcare)
Increase in income does not always lead to higher investment in human capital and education
Investing in education: the human capital approach
Education/healthcare = investment, gains are not felt at start, they increase over time (expect return in
future)
Present discount value: how to measure future gains in todays worth, compared to todays cost of.
I
. investment
Add diagram
Direct costs: school fees, textbooks, laptops
Indirect costs: opportunity costs (contribution to household production, money gained from.
f
. employment in that time)
Factors that in uence value of investment:
-job opportunities/rate of employment/likeliness of getting job (gender, ethnic disparities etc)
-current nancial situation (no disposable income, access. To credit/insurance)
-life expectancy
(Add graph rates of return of education) add formulas and research
In general, primary education has highest rate of return, as you go from no education to some (we
make the biggest jump in primary school). In developing countries (compared to developed) private
rate of returns are higher due to income di erence between those with less and more schooling is
greater on average.
Social bene ts: increased awarness (health/voting/citizenship etc)
Private bene ts: income gained from jobs that need education
High correlation between multidimensional poverty and education, as well as looking at gender.
p
. in uence (human development report 2020)
Education poverty trap: ?
Educational systems and Development
Assumption there is demand for education
Determinants for the demand for education:
-private bene ts of education (direct bene ts to individual)
-private cost of education(direct costs + indirect costs for individual)
Assumption: individuals invest till private bene t of additional investment=private cost of the addition
