Health is a prerequisite for increases in productivity, while successful education relies on adequate health as well. Thus, health and education are considered as vital components of growth and development. These two human capital issues have to be treated together because of their close relationship and the fundamental fact that when we talk about investing in a person’s health or investing in a person’s education, we are after all talking about the same person.
The importance of education for a developing country to absorb modern technological advancements and to develop the capacity for self-sustaining growth and development can hardly be over-emphasised. Education is not just a contributor to human development but may also have positive bearing on increasing per capita income. A country that attains reasonable level of education for its population moves up the ladder from production and export of less to more capital intensive goods. Moreover, health is a prerequisite for increases in productivity, while successful education relies on adequate health as well. Thus, health and education are considered as vital components of growth and development. These two human capital issues have to be treated together because of their close relationship and the fundamental fact that when we talk about investing in a person’s health or investing in a person’s education, we are after all talking about the same person.
The developing countries of the world face huge challenges as they seek to continue to improve their health and educational systems. Development economists agree that distribution of health and education within countries is as important as income distribution. Life expectancy for better off people, in developing countries, is usually higher than the poorer sections. Child mortality rates in developing countries remain alarming as compared to the developed world as many of these deaths generally occur from easily treatable conditions including that of dehydration caused by diarrhea.
The state of affairs in education is also not different. On an average, a child in Europe, North America or Japan can expect to receive more than twelve years of schooling as compared to his counterpart in sub-Saharan Africa or South Asia where a child spends less than four years in school. Despite a close relationship between income on one hand and health and education on the other, evidence shows that higher household income does not automatically guarantee improved health and education. Human capital must be given top priority even in economies that are growing rapidly.
FIRST: We can think of uneducated and educated workers as perfectly substitutable inputs to production. Labour is homogenous and can be measured in terms of efficiency units. Holding constant the number of actual workers, an increase in the level of education in the labour force increases the size of the labour force measured in efficiency units. This increase in the number of efficiency units per worker generates greater output per worker since labour is an input to production. Growth in the average years of schooling per worker is thus associated with growth in output per worker.
SECOND: Uneducated and educated workers can be seen as imperfectly substitutable inputs to production. While constructing a motorway, three workers with primary school education cannot replace one civil engineer. Educated and uneducated labour are treated as different inputs and different production processes can be thought of as making more or less intensive use of educated relative to uneducated labour.
In the international trade literature there is considerable evidence that as less developed countries catch up to the education levels of more developed countries, they start shifting from exports of products that intensively use uneducated workers to exports of products that intensively use educated workers.