A brief study on the economic development of health and education in India in the present scenario. It talks about joint investment in both the sectors considering their rate of return, while dealing with questions like why increasing income is not sufficient? It also briefs about child labor and gender gap.

1. HUMAN CAPITAL:
EDUCATION AND
HEALTH IN ECONOMIC
DEVELOPMENT
Economic and Growth Policy

2. The Central Roles Of Education And Health
Education and health are basic objectives of development. Both are
fundamental to enhancing the quality of human life and ensuring
economic progress.
Education is essential for a satisfying and rewarding life while at the
same time enabling the developing country to absorb modern
technology and develop capacity for self sustaining growth.
Health is a prerequisite for increases in productivity and providing a
base for education to thrive.
Thus, both education and health are vital components of growth and
development- inputs to aggregate production function. Their dual role
as inputs and outputs gives them a central place in economic
development.
There has been some dramatic improvements in world health and
education over past half century. Death rates and child mortality rates
have been falling down while some major killers have been eradicated,
eliminated and controlled. Recent decades have witnessed an
unprecedented extension of literacy and other basic education to a
majority of people in the developing world.

3. However, there continues to be challenges for the developing world.
Distribution of health and education between countries is important.
Life expectancy, child mortality rate show contrasting figures across the
rich and poor countries. Chronic illness, diarrhea, malnutrition, paristic
infections and various other recurrent illness are causes of such
contrasting data. These conditions are easily treatable in developed
countries but lack of resources and development hinders progress in
underdeveloped and developing countries. Same are the finding for
education status also.
Health and education are two human capital issues which are closely
tied together. The connection includes:
i)similar analytical treatment, both are forms of human capital
ii)dual impact of effect of health spending on effective education and
vice versa.
iii)fundamental fact that investing in either of the issues would
ultimately benefit the same person.
Human capital must be given direct attention. A higher household
income is no guarantee of improved health and education. They may be
also unequally distributed. But, improved health and education helps
deteriorating health and education. Investment is human capital must
be undertaken with equity and efficiency.
Education and Health as Joint Investments for
development
Greater health capital may raise return on investment in education
because:

4. 1. increased school attendence
2. children will learn more efficiently
3. longer life spans raise the return on investments in edu.
4. able to use education productively at any point in life
Greater education capital may raise return on investment in health
because:
1. health programmes rely on skills learned in school
2. school teaches basic personal hygiene and sanitation
3. formatting and training of health personnel
4.Finally, an improvement in productive efficiency from inv in
education raises the return on a lifesaving investment on health.
Improving Health And Education: Why Increasing
Income is not sufficient?
With higher income, people and govt can afford to spend more on
health and education ;and with greater health and education comes
greater productivity and incomes.
 As normal goods, people will spend more on human capital when
income is higher, However, evidence does not show a proportianate
rise in income and health and education. Household choices of
consumption may lead to this small linkage between income and
nutrition:
1. Income is spent on other goods than food
2. Part of food expenditure includes increasing food variety, than
nutrition/calories.

5. Thus, policies aiming at increasing incomes for poor, like credit for
microenterprise, may not lead to desired increase in health level. and
successful development in general.
 Even if income elasticities for calories are higher than traditional,
calories are not the same as nutrition; and nutrition of earners are not
the same as that of their children. Income elasticity of convenience
food is greater than unity. Increasing income allows family to switch
consumption from nutritious to junk/canned food which might be
perceived as modern and a symbol of economic success. Parents may
then fail to put a check on children's food consumption.
 The better education of the mother, the better the health of her
children. Formal education teaches health knowledge to future
mothers, literacy and numeracy skills help them in diagnosing and
assessing their child's health problems, and exposure to modern society
makes them more receptive to modern medical facilities.
 Health Status also affects a child school performance. Better health and
nutrition leads to earlier and longer school enrollments, better school
attendance, and more effective learning. Thus to improve effectiveness
of schooling, one must improve the health of children in developing
countries.
 Finally, the spillover benefits to an individual's investment. An educated
person proves to be beneficial to society. Moreover a healthy person
may not be just less contagious but will benefit the society in more
ways than a sick person can ever.
Investing in Education And Health: The Human
Capital approach
Human capital is the term used for education, health and other human
capacities that can raise productivity when increased. After an initial

6. investment is made, a stream of higher future income can be generated
from both expansion of education and improvements in health. Health
and education also contribute directly to well being, but the human
capital approach focuses on their indirect ability to increase utility by
increasing incomes. The impact of human capital investments in
developing countries can be quite substantial. Those with higher levels
of education start full time work at a later stage, their incomes quickly
outspace those who started working earlier. Education costs include
any direct tution or expenditures specifically related to education, such
as books, and indirect costs, income foregone while he was in school.
∑(Et-Nt)/(1+i)t
E- Income with education
N-Income without extra education
t- Year
Summation is over expected years of working life
An analogous formula is given which is applied to health, with direct
and indirect cost of resources devoted to health compared with the
extra income gained in the future as a result of higher health.
The rate of return will be higher whenever the discount rate is lower,
the direct or indirect costs are lower, or the benefits are higher.
Social Rate Of Return: Found by reducing the benefits by the amount of
public subsidy for the individual's education, because this is part of the
investment from the social point of view , by considering pre tax and
after tax incomes.

7. Child Labor
When children work under age14 work, their labor time at minimum
disrupts their schooling and prevents them from attending school. The
health suffers, poverty alleviates, and exploitative working conditions
become common.
Nevertheless, its not obvious that an immediate ban on child labor will
make them better off. Work provides them with funds for betters
schooling, health care and nutrition. MULTIPLE EQUILIBRIA is a model
which shows how ban on child labor can help this issue whereby
banning child labor would prove beneficial.
ASSUMPTIONS: a) A household with high income would not send his
children to work
b)Child and adult labor are substitutes.
 Let's assume all adults work regardless of wage, which gives us a
perfectly inelastic, vertical adult labor supply curve- AA'
High inelastic supply - poor children and families
 If adult wages fall to Wh,families find they are poor enough to send
their children to work. Ass it continues to fall, more families realize this
and labor supply expands along the s-shaped curve untill wage of Wl is
reached, where all children are working. Here we are on TT'-aggr.
labor supply of all adults & children
 As long as wage is above Wh, supply curve is along AA';
if wage is below Wh, supply cure along TT' and
in between it follows s-shaped curve
Considering labor demand curve D(L) , if demand in inelastic
enough to cut AA' above W(H) and also cut TT' below W(L), then there
will be two stable equilibria, labelled E1 and E2.

8. E2- bad equilibria, an effective ban on child labor will move it towards
E1. Moreover, once the economy had moved to new equilibrium, child
labor ban would be self enforcing. If poor families, and nobody send
their child to work, they'd be better off. Bt this is not feasible.
Also, employers may use political pressure to prevent enactment of
child labor, since they'd have to pay higher wages.
Approaches to child labor policy
 Recognize child labor as an expression of poverty rather than
directly addressing labor.
 Emphasize strategies to get more children to school.
 Stressing palliative measures as preventing abuse and to provide
support services for working children.
 Banning child labor in its most abusive forms
GENDER GAP: Women and education
Young Females receive considerably less education than young males
in almost every Developing Country. Women enrollment in primary
education and secondary education is lower than that of men at least
by 10 percentage points. This Educational Gender Gap, greatest in the
poorest countries & regionally in Middle East and North Africa. For all
developing countries taken together:
Female Literacy Rate- 29% lower than male rate.
Mean years of Women school- 45% lower than males.
Female enrollment rates in Primary, secondary and post secondary
schools- 9%, 28%, 49% lower than male rate.
Although progress has been made, a substantial gender gap
persists.

9. Closing the Educational gender gap is economically desirable for
4 reasons:
1. The rate of return on women's education is higher than that
of men.
2. Increases their productivity and results in greater labour
force participation, lower fertility, later marriage, greatly
improved child health and nutrition.
3. Multiplier effects on quality of a nation's human resources
for many generations to come.
4. Significant improvement in their roles and status via
education can have an important impact on breaking the
vicious cycle of Poverty and inadequate schooling.
Consequences in Health or education
 Studies show that expansion of basic education of girls earns high
rates of return of any investment. This is one reason why
discrimination against girls is not just inequitable , but very costly
from standpoint of achieving development goals.
 Education of the girls is the most cost effective means of
improving local health standards. Inferior education and Health
care access for girls shows interlinked nature of Economic
incentives and cultural setting.
 The bias towards boys helps explaining the "missing women
mystery". In Asia,there are fewer females as a share of population
than would be predicted by demographic norms.
 These ratios show that even though women have a higher life
expectancy than men, there are more men than women.

10.  Greater mother's education, however, generally improves
prospects for both her sons and daughters health and education.
Evidence show that increase in family income do not automatically
result in improved health status or educational attainment. If higher
income cannot be expected to necessarily lead to higher health and
education , as we will see in subsequent sections, no guarantees that
higher health or education will lead to higher productivities and
incomes.
Educational System And Development
Much of education development issues revolves around two
fundamental economic issues:
1. interaction between economically motivated demands and politically
responsive supplies
2. important distinction between private benefits and social benefits
and costs of different levels of education and implications of these
differentials for educational inv strategy.
 Educational Supply and Demand: Relationship between
employment opportunities
1. Demand Side : Principle influences on the amount of schooling
desired are a)a more educated student's prospect of earning more
income through modern sector employement (Private benefit)
b)educational cost , both direct and indirect
This is Derived Demand for high wage employement in modern
sector.

11. 2. Supply Side: Quantity of school places is determined by political
processes. The public supply is fixed by the level of government
educational expenditures. These are in turn influenced by the level of
aggregate pvt demand for education.
Amount of schooling demanded to qualify an individual for modern
sector jobs is determined by following factors:
 wage/income differential
 probability of success in finding modern employment
 direct private costs
 indirect/opportunity cost of education
Social benefits of education: Benefits of the schooling of
individuals, including those that accrue to others or even
to the entire society, such as the benefits of a more literate
workforce and citizenry
Educational certification: The phenomenon by which jobs
require specified levels of education.
Basic education: The attainment of literacy, arithmetic
competence, and elementary vocational skills.
Social versus Private benefits and costs:
It has been found out that in case of developing countries the
social costs of education (the opportunity costs to society as a
whole) increase rapidly as the students move to higher
education. The private costs _ the costs which the students
themselves have to bear, increase more slowly or even they
may decrease as the students climb over the ladder of higher
education. Thus because of such widening gap between societal
and private costs the demand for higher education is having a

12. greater stimulus than demand for lower education. Thus the
educational demand at higher level is more exaggerated. In
such situation when demands are increasing progressively the
social costs of education also go on increasing. More and more
resources will have to be misallocated to educational expenses
in terms of social costs, and the potential for creating new
jobs will come down as the govts. have to face the budget
constraints.
The earnings of educated individuals do not reflect the external
benefits that affect society as a whole. Such benefits are known
as externalities or spillover benefits, since they spill over to
other members of the community. They are often hard to
identify and even harder to measure. In the case of education,
some studies have succeeded in identifying positive
externalities, but few have been able to quantify them. If one
could include externalities, then social rates of return might well
be higher than private rates of return on education.
Policies for Health, Education, and Income
Generation
In the coming years, the clear evidence that health and education
are joint investments may offer scope for a more integrated policy
approach. One of the most effective investments we can make in
education quality is to improve child health. Similarly, one of the
most effective investments we could make in health programs in
developing countries now explicitly integrate incentives for the
development of human capital among low income families.

13.  PROGRESA is a mexican program on education, health and
nutrition. It has one of the central features the promotion of an
integrated package to promote human capital.It provides cash
transfers, growth monitoring. nutritional supplements, and
participation in meetings where health knowledge is
dissesimnated.
 The international NGO project Hope was constarined in
providing sustained improvemnts in health and education due
to poverty.
 Village health banks are created to provide credit and business
skills to low income women, access to health care,knowledge,
 The Expanded Program on immunization controls diarrheal
disaeases, acute respiration infections, breastfeeding etc.
The health and education components are intended to improve
the benefits of increased income and to reinforce behaviours.
Health banks have been implemented in Ecuador, Honduras,
Dominican Republic, Malawai, Guatemala.