de Janvry and Sadoulet
Human Capital: Education and Health
Revised November 14, 2010
Introduction: Why are education and health important for development?
Education and health/nutrition, that we called “basic needs” in characterizing the
dimensions of development in Chapter 1, are both essential development outcomes and
essential instruments for development: they are simultaneously ends and means. Because
they are intrinsically valuable to individuals for their well-being, education and health are
development objectives in themselves. The Human Development Index for this reason
gives salience to not only per capita income, but also to levels of achievement in
education and health in characterizing a country’s level of development. But education
and health are also major sources of economic growth, a key dimension of development.
This is because better education and health contribute to raising the productivity of labor
and the quality of entrepreneurship, and hence levels of wage and income.
From a development policy perspective, the reason why education and health pose
special problems is because of two important features. The first is that there are strong
associated with education and health achievements. Your
education will not only benefit you personally through access to better jobs and higher
incomes, but it will also benefit others as it helps create more jobs, improve the human
capital of your children, and create a better citizenship in political participation. If you are
in better health, carrying less infectious diseases, you will reduce the risk of disease for
others. Think for example of the de-worming of school children in Kenya: if some are not
treated, they will re-infect the others (Miguel and Kremer, 2004). Treatment should thus
be applied at the school, not the individual level. The same applies to vaccination against
a communicable disease as it benefits not only the recipient but also others in the vicinity.
Take home messages for chapter 16
1. Health and education are both ends and means for development. They create strong social
externalities and supporting services are largely public goods, resulting in under-investment coming
from both the demand and supply sides.
2. Levels of schooling depend on the intrinsic value of schooling, the expected return from schooling,
the direct cost and the opportunity cost of schooling, and the discount rate. Poor people tend to under-
invest more in the schooling of their children as they have lower intrinsic value, liquidity constraints
in meeting costs, and higher discount rates, contributing to the inter-generational transfer of poverty.
3. Conditional cash transfers to poor mothers impose conditions on school attendance with the
objective of reducing both current and future poverty. These programs have been effective in
increasing the demand for education among the poor.
4. The supply of health services is reduced by public under-investment and weak intellectual property