Options
Health, Education and human capital formation in developing economies
Type
applied research project
Start Date
01 January 2007
Status
ongoing
Keywords
Human capital formation
Health shocks
HIV/AIDS
Malaria and TB
Educational choices
Life-cycle models
Sub-Saharan Economies
investment under stochastic shocks.
Description
Joint project with Dr. Taghreed Adam, MD, PhD from the Health Systems Financing Department at the World Health Organization, Geneva, Switzerland. The project builds on empirically-based life-cycle founded models in developing a framework to capture the effect of health financing interventions on human capital formation and growth. The initial phases of the project provides the foundation for the development of an empirically implementable model that aims to understand the effect of public health and educational policies on economic and social outcomes (e.g., human capital formation, education investment, inequality) in the third world economies that are subject to adverse health conditions (e.g., HIV/AIDS, malaria or TB). This first working paper draws from the GE-OLG macro-economic model by Bell, Devarajan and Gersbach (2003, 2006) to provide a micro-econometric foundation to human capital formation. The first application deals with the Kagera Development and Heath Survey (Kagera Region, Tanzania) and we are in the process of considering the application of the model to the South African Economy. First working paper: A life-cycle model of human capital formation and educational choices in developing economies. The intention of this ongoing project is to provide alternative tools to existing macroeconomic methods for the analysis of policy options in third world economies, using existing micro-economic data sources (both cross-sections and panel data)
Leader contributor(s)
Vazquez-alvarez, Rosalia
Adam, Taghreed
Partner(s)
Dr. Taghreed Adam, World Health Organization (WHO), Geneva, Switzerland
Funder(s)
Topic(s)
Health Economics
Education
Applied Econometrics
Applied Policy analysis.
Method(s)
Theoretical development of micro-founded life-cycle models
Applied econometrics at the micro-economic level to panel data.
Range
Institute/School
Range (De)
Institut/School
Division(s)
Eprints ID
44127
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PublicationA Life-cycle model of human capital formation and educational choices in developing economies( 2008)Vazquez-alvarez, RosaliaIn impoverished societies a shock to the household's resources often results in a decision to reduce the contemporaneous investment on children's education. Although such shocks may be transitory in nature they could lead to permanent long run effects in terms of reduced human capital for future generations thus further enhancing a state of deprivation. This paper models the long-run effects of productivity shocks using a micro-economic founded life-cycle model where investment uncertainty faced by heterogeneous households plays a crucial role with regards to optimal educational choices for their primary school age children. The dynamics in the structural model provide the basis for identification and estimation of endogenous human capital formation allowing for household's heterogeneity, a concept often missing from empirically implemented macro-models of growth. The empirical section illustrates the modelling strategy and estimation procedure using data from Tanzania (The Kagera Health and Development Survey, 1991-1994). The results suggest that primary school age orphans that attend school regularly can experience gains in human capital (i.e., productive capacity within the household) that are 6.2% higher than similar orphans in a non-schooling regime. Howerver, when one or both parents are present to bring up the children, the gains that result from attending school are small when we compared these to the human capital gains that result from intergenerational transfers,i.e., gains purely from knowledge transfers between generations.Type: working paper