Health, Education

1
Health, Education Productivity Linkages in
the ECA Context

• Cem Mete
• ECSHD

2
Highlights from the LiteratureHigh Returns to
schooling?

• Heckman (2003), on returns to schooling in
  China
• true rate of return to education and skill
  formation is very high there might be
  underinvestment in human capital when benefits to
  education are not directly captured by
  individuals wages of the skilled are held down
  by policy

3
A similar argument can be used to explain
relatively low returns to schooling in ECA
countries. But if this is the case, one should
observe higher returns to schooling in fast
reforming countries at least in the private
sector. Is this the case? (from Yemtsov,
Cnobloch and Mete 2005)
4
Highlights from the LiteratureHigh returns to
health?

• Schultz (2002), on causal impact of health on
  wages in Ghana, Brazil and the US
• instrumental variable (IV) estimates of
  heights effect on wages imply a several fold
  larger impact than the OLS association between
  height and wages in the lower-income countries.
• Mete and Schultz (forthcoming) on causal impact
  of health on labor force participation in Taiwan
  IV estimates of healths effect on participation
  is about twice the magnitude of the OLS
  estimates

5
Highlights from the LiteratureOn the production
of education and health

• Chaudhury et al. (forthcoming), interpreting
  very high absenteeism rates of teachers and
  health care providers in developing countries
• Our results complement a large literature that
  argues that corruption and weak institutions in
  developing countries reduce private investment
  and, thus, growth. Poorly functioning government
  institutions may also impair provision of
  education and health.

6
Measurement and Data IssuesReturns to schooling 1

• Measurement error in the reported
  wages/earnings unobserved skills etc these
  are the types of things that we may have to live
  with...
• The possibility that we are not observing the
  real returns (Heckmans argument for China)
  cross-country comparisons may be the solution for
  ECA countries, but one needs to go much deeper
  than the graph shown earlier in this
  presentation.

7
Measurement and Data IssuesReturns to schooling 2

• Especially in ECA countries, (as part of wage
  regressions) there is a need to model not only
  selection into employment but also the
  public/private sector employment decision.
• The employment and earnings prospects of
  vocational school graduates are of critical
  importance in the HD sector. While there is
  empirical evidence on declining returns to
  vocational secondary education, empirical
  challenges include the modeling of
• selection into vocational education and
• selection out-of general secondary education.

8
Measurement and Data IssuesReturns to health 1

• There is not a single study in the literature
  that shows the casual impact of health status on
  employment and wages in an ECA country.
• This is in part because of lack of relevant
  data. Two key challenges
• Lack of objective proxies of health status (for
  children this is relatively easy, one can focus
  on stunting etc., but a typical HBS does not
  collect information on height and weight and
  while DHS tend to have this information they are
  weak when it comes to collecting information on
  employment and wealth).
• Lack of instruments to treat health as an
  endogenous variable in an employment/wage
  equation.

9
Measurement and Data IssuesReturns to health 2

• What are the standard good instruments in this
  framework?
• Local price of health, ideally at the time of
  birth (not feasible in most ECA countries)
• Availability and quality of local health
  infrastructure
• Endowments and lifetime income
• Parental longevity
• Childhood conditions

10
Measurement and Data IssuesThe linkage between
the production of Human Capital and returns to
Human Capital

• An extremely important (and ambitious) research
  agenda would be to make the connection between
  the
• Status of public sector service delivery in the
  education and health sectors research (the recent
  papers by Alderman, Chaudhury, Kremer etc)
• And the role of the quality of human capital on
  returns (the arguments made by Birdsall, Berhman
  etc., starting from the 1980s).