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Gross Domestic Product

Constraints for Human Capital Development

Human capital, in its broadest sense, comprises people’s educational attainment, their health and nutrition.

There is solid evidence associating more schooling and better nutrition with higher income and with enhanced productivity. Education may generate other important externalities that can indirectly propel growth. For instance, how well a mother is educated is crucial for her children’s learning and hence for human capital accumulation in the family.

The investment may hold little appeal for poor families primarily because of the opportunity cost of children and young people who could be working in their homes or bringing in outside paychecks.

Hence the importance of education and health interventions both on the supply side (such as public spending on infrastructure and improvements in service and quality) and on the demand side for these services, for instance subsidies tied to investment in human capital for the poor (two examples are Mexico’s Progresa program now called Oportunidades , and Brazil’s Bolsa Escola grants). Just as crucial are early-intervention programs in health and nutrition and basic infrastructure investment (running water, electricity, transportation) because of the synergies at work between sound nutrition and people’s ability to use new learning technologies (distance learning institutes, distance high-school education). Reforms to overhaul the institutional apparatus for social services delivery need to make sure that the poor have access to these services.