Education and Development

1. Education and Development Francesco Burchi Francesco.burchi@die-gdi.de

2. Index of the presentation • Education as Human Capital • Education in the Capability Approach • Implications for projects’ evaluation • Educational indicators rooted in the Capability Approach • Trends in educational indicators • Educational Policies Master HDFS

3. Development as Growth: The Key Models • Harrod-Domar Model (1948): • Solow Model (1957): extension of Harrod-Domar model, with the addition of the input labour and technology. • Common characteristics: growth depends on physical capital accumulation • Shortcomings: what are the residual factors? Master HDFS

4. Education and Development:The Human Capital • In addition to physical economic resources, each society embodies also an immaterial resource, the human capital, which is mainly reflected in the labour. The first proponents of this concept were: Theodore W. Schultz (1960) and Gary S. Becker (1961). • Schultz: growth rate > accumulation rate of physical capital. Cause: human capital accumulation. • Later on, human capital was incorporated in growth models: e.g., Lucas and Romer. Master HDFS

5. What is Human Capital? • Human capital is a capital good that depends on investments in elements of human beings: - Health, which also includes nutrition - On the job Training, which ensures specific skills to be used in the firm where the person works - Study Programs for Adults, such as extension services in agriculture, to obtain practical abilities necessary in the labour sector. - Formal Education, years of schooling. Master HDFS

6. The Human Capital Approach:objectives and instruments • Micro unit of analysis: worker • Macro unit of analysis: economic system • Micro objective: increase in individual productivity • Macro objective : economic growth = economic development= poverty reduction • Human capital= factor of production to be added in the production function: Y = f (C;L;H...) where H= human capital Master HDFS

7. Empirical Analyses (1) • Although the human capital concept covers multiple dimensions, most of empirical studies founded on this theory focus on one single dimension: education. • Education is usually measured by the variable “years of schooling”. Master HDFS

8. Empirical Analyses (2) • Psacharopoulos (1971) applies the HC theory with the following hypothesis: 1. HC is measured only by education 2. Educational capital is measured only in the labour-force. Master HDFS

9. Empirical Analyses (3) • Psacharopoulos estimates two different growth models. • Schultz Model: capital = physical capital + human capital. Investment in HC is further divided into 3 levels of education: elementary, secondary, tertiary. • Denison Model: human capital is not another production factor, but it is embedded in labour. Labor is more or less qualified according to the level of education completed. Master HDFS

10. Empirical Analyses: Results Using data for the period 1960-1965 from several parts of the world, Psacharopoulos (1971, 116-9) achieves the following results: • The contribution of education on growth is everywhere relevant, but significantly larger in developing countries. • The two models provide different results: the Schultz model outlines significant contribution of education only in few countries (including US) • In none of the 13 countries, tertiary education is the most important. • On average, the impact of education is divided in: primary (46%), secondary (40%), tertiary (14%). Master HDFS

11. The Human Capital Approach:Summary • This approach, which follows a neoclassical economic framework, attaches to individuals a purely instrumental role for the enhancement of economic growth. • The authors study the economic returns of an investment in education, as strategic sector. • The individual enters this approach only if he or she works. Master HDFS

12. Capability Approach • 1980s: proposed by Sen and then re-addressed by Martha Nussbaum. • Development = Capability Expansion • Not all capabilities, but those “valuable”. Master HDFS

13. Capabilities and Functionings • Functionings: the set of things a person “is” and “does”. E.g., being a professor, being healthy, being well educated and so on. Functionings are constitutive elements of people’s life. • Capabilities: the set of things a person “can be” and “can do”; alternatively, the set of all potential functionings, among which she chooses the final functionings (achieved functionings). Master HDFS

14. Education and Capabilities (1) • Education has a double role for (human) development: - Direct Role - Indirect Role The indirect role is realized through: • Economic Production • Social Change (Sen “Human Capital and Human Capability”) Master HDFS

15. Education and Capabilities (2) • Direct role: being educated, for example, allows to fully enjoy a cultural event, which directly improves the life of the person (Terzi, 2003). “Education nurtures processes of critical reflection and connection with others that are intrinsically ethical and not merely instrumental” (Unterhalter, 1999). • Indirect role: being educated allows the individual to earn more and to raise his/her productivity, but it also allows to participate in public debate, to vote and, broadly speaking, to be active. While the Human Capital Approach recognizes only the indirect (or instrumental) role plaid through economic production, the Capability Approach embodies all these aspects. Master HDFS

16. Education and Capabilities (3) • I. Robeyns (2006) distinguishes the instrumental role in personal- collective; economic-non economic. 1.a) Personal economic role: being educated allows people to find a better job, to raise income, to escape poverty. 1.b) Collective economic role: being educated can promote economic growth at national level and can be fundamental for a conversion of the economic system (e.g. from an agriculture-based system to an industry-based system). 2.a) Personal non-economic role: “education can open the mind of people” (p.3), letting people have a better access to information, to be knowledgeable about contraception systems, health, and to communicate. 2.b) Collective non-economic role: the acquisition of a minimum level of education can, for instance, help women to realize that their subordinated position is not the same all around the world and that, together, they can make pressure to change their condition. Master HDFS

17. Evaluating Education: from Functionings to Capabilities • 2 children fail the mathematics exam: same functioning (not activated) • And their capabilities? • Focus on both personal situations (HH economic conditions, learning opportunity,…) and environmental/external conditions (learning environment, ability of teachers, availability of school, low fees,…) Master HDFS

18. Why is education important for development? • Increases income, employability, productivity • Ensures numeracy • Improves the capability to take part in decision making at household, community and political level • Improves social relations • Enhances empowerment (especially for women and vulnerable groups) • Ensures higher knowledge of the person’s rights • Allows to read the instructions of a medicine, to acquire information from written sources such as posters and newspapers • Permits to improve nutritional outcomes by, among other things, improving the diet Master HDFS

19. A comparison between Human Capital and Human Capabilities Problems in the Human Capital Approach: • Labour markets perfectly working: right signals? And discrimination? • “Schooling … like a machine”: and the learning environment? • Internal dynamics in school determine inequalities in education not included in the HCA. • Policy implications: invest in people with higher economic returns (men). Master HDFS

20. Case Study • Example: Alkire 2002, pp. 255-270 • Alkire analyzes a literacy project undertaken by Oxfam in Pakistan, which aims at increasing women’s capacity to read, write, and be knowledgeable about daily matters such as health and nutrition, with a further intention to increase their income. Master HDFS

21. Evaluation through HCA • Following the HCA, i.e. applying cost-benefit analysis, the project would be considered as a failure because: a) Traditional and opportunity costs for women are high. b) Economic benefits have proved to be very limited. • Due to social constraints, there is no employment market for women; thus, they end up making handicrafts, for which literacy does not produce an increase of income. Master HDFS

22. Evaluation through CA (1) • It is necessary to consider a wider set of benefits, rather than just economic ones. Therefore, Alkire tries to assess the capabilities expanded through the project, by letting students identify and rank the capabilities enlarged by the project. • Women indicate knowledge and empowerment as core benefits, where “Empowerment indicated their awareness of what they themselves could do and be” (Alkire 2002, p. 266). Master HDFS

23. Evaluation through CA (2) • Following the CA, the project would be financed because it affects key aspects of women’s life, producing social transformations, which are not recognized in the human capital framework. The latter could be useful to see if similar results could be obtained at lower costs. • Finally, the price for a more comprehensive approach is complexity: evaluating a project through the CA, that is, measuring a wider range of contributions of education is clearly more problematical than evaluating it following a human capital framework. Master HDFS

24. Concluding Remarks • Following the Capability Approach: • We do not assume that people act only for short-term monetary returns. • We can analyze social impacts, most of which are not measurable. • Since the general goal is to improve the critical capacity and the responsibility of people, attention is firstly given to primary and basic education. • The overall relevance of women’s education is adequately recognized. Master HDFS

25. Educational (and HD) indicators

26. Educational indicators • Input Indicators (quantity and quality) • Output indicators (quantity and quality) • Outcomes indicators (education-related functionings) which are result of both qualitative and quantitative educational inputs and outputs • Impact indicators Master HDFS

27. Input indicators • Public expenditure in education; • Private expenditure in education; • School resources; • Teachers/students ratio, • Class size and instruction • Teaching material; • Quality and adequacy of curriculum Master HDFS

28. Output indicators Measures of ACCESS: • Enrolment rate; • Attendance rate; • Dropout rate, • Repetition rate Master HDFS

29. Outcome indicators (functionings) • Completion rates (in between output and outcome indicator); • Expected number of completed years of schooling • Literacy rates; • Standardized test measures of student and adult achievement in terms of literacy and numeracy Master HDFS

30. Impact indicators • Effects on other capabilities such as nutrition and health? • Effects on economic production, personal earnings or economic growth? Master HDFS

31. Trends in Educational Indicators Master HDFS

32. Expenditure in education: Africa Source: my elaboration on World Bank data Master HDFS

33. Gross enrollment rate in primary school, by region Source: my elaboration on World Bank data Master HDFS

34. Gross enrollment rate in primary school in SSAs en in primary school in SSA Source: my elaboration on World Bank data N.B.: SAP in Niger (1983); in Mali (1982); in Kenya (1980 -13 SAP); in Uganda (1987); in Zambia (1990); Botswana (NO adjustment) Master HDFS

35. Trends in primary school completion rates (1981-2013) Master HDFS

36. Primary school completion rates, by region Source: my elaboration on World Bank data Master HDFS

37. 1980s: Structural Adjustment • 1982: Mexico debt crisis • Launch of SAPs - WB and IMF • Privatization • Minimal state intervention • Liberalization • Financial stabilization (esp. Reduction in public spending) • Investments in “productive” sectors (not education)

38. Adjustment Vs. non-adjustment • Several studies show that there is substantial reduction in funds to education in “adjusting” countries • In countries not under SAPs (e.g. Swaziland and Botswana), the expenditure on education is significantly higher • Nigeria: example of SAP’s negative effect • “one fits all” policies, also in education Master HDFS

39. 1990s-2000s • 1990: Education for all Initiative: Right to education • Human Development Approach (UNDP) • MDGs Master HDFS

40. Indicators: MDG 2 and 3 Master HDFS

41. Trend expenditure on education (1975-2008) Master HDFS

42. Aid to Education (abs. values): 1995-2012 Source: my elaboration on OECD data

43. Aid to Education (% total aid): 1995-2012 Source: my elaboration on OECD data

44. Distribution of Aid to Education Source: my elaboration on OECD data

45. Primary school completion rates, by region Source: my elaboration on World Bank data

46. Trends in primary school completion rates Botswana Swaziland Senegal Mali Source: my elaboration on World Bank data

47. Differences in policies • School fees cancellation (Botswana 1987; Tanzania, Uganda e Kenya and others at the beginning of 2000). • Improvement in many cases of quantitative parameters, but often worsening of qualitative ones (UNESCO). • Cause? Low budget, dependency on donors, poor infrastructures not able to absorb increasing number of students, low salaries for teachers. Master HDFS

48. Trends in pupil-teacher ratio (primary school) Source: my elaboration on World Bank data Master HDFS

49. Trends in literacy rates Source: my elaboration on World Bank data Master HDFS

50. PISA tests assess the competencies of 15-year-olds in reading, mathematics and science in 65 countries. Mixture of open-ended and multiple-choice questions. PISA tests assess the competencies of 15-year-olds in reading, mathematics and science in 65 countries. Mixture of open-ended and multiple-choice questions. Source: Glewwe (2013) Master HDFS