Education and Development: Scholarly Perspectives

Development of a country is a complex phenomenon, and it depends on multitude of factors. The extent to which a country can make best use of its economic resources for economic prosperity is affected by--but not limited to--political centralization and administrative decentralization, political and economic institutions, political stability, technology and human capital through education. In this article, I will be dealing with the last term, which, in economics, refers to the knowledge, skills, experience, training, and wisdom possessed by all individuals in a population.

Education has long been viewed as the guarantor of security, status, wealth, and personal well-being.  It is reiterated by researches that a country can enjoy sustained prosperity only when it undergoes large-scale investment in education (Fischer & Berger, 2014). Other research affirms that the return on investment in education in developing countries is twice as much as in developed countries (Pscacharopoulous, 1994, pp. 1325-1343), and, for this reason, education may perhaps be more important in developing countries.

Surprisingly, there is a wide range of literature dealing with education and economic prosperity of countries, some deny the relationship while others reaffirm it. Academic researchers prior to the twenty first century are inclined to reject the claim about the correlation between higher educational attainment and the increases in the GDP per capita income of the country, William Easterly being the major one. However, there is an agreement among contemporary researchers and experts in the claim that education plays a key part in growth of the country.  Former Prime Minister of Great Britain, Gordon Brown, in the World Economic Forum assert that education is very important for today’s world in which human capital is as important as physical capital and assets (Brown, 2014). He is one of the many to point out the imperative of education in an industrialized and knowledge-based world.  As to the issue of educational policies in developing areas, continuous adjustment in education policies is seen and researches do not have a vocal opinion on as to what educational policy can work best in developing areas.

There has been a massive expansion in access to education throughout the developing countries in last four and a half decades. The median primary enrollment rate increased from 80 percent  in 1960 to 99  percent in 1990, and the median secondary enrollment rate increased from 13 percent to 45 percent in 1990 (Easterly, 2001, p. 73). 

Similarly, between 1999 and 2006, the primary school enrollment rates in East and South Asia increased from 75 percent to 88 percent and from 54 percent to 70 percent in Sub Saharan Africa; while -between 1995 and 2008- secondary gross enrollment ratios increased from 44 to 51 percent in South Asia, from 44 percent to 51 percent in sub-Saharan Africa and from 64 percent to 74 percent in East Asia (Banerjee & Duflo, 2011, p. 74).

Despite the massive educational expansion in poor countries, the median growth rate of poor countries has fallen over time:  “the growth of output per worker was 3 percent in the 1960s, 2.5 percent in 1970s, -0.5 percent in 1980s and 0 percent in 1990s” (Easterly, 2001, p. 74). Several studies show the lack of association between growth in schooling and GDP growth. Easterly (2001) in  The Elusive Quest for Growth -standing on the research by his contemporary scholars- argues that investment in education in developing countries has  not helped them grow economically. The study by Pritchett (1999) constructs a series of research on the growth in capital and can find “no positive association between growth in education and growth of output per worker” (Pritchett, 1999, pp. 223-239). Similarly, studies from Benhabib and Spiegel in 1994, found no co-relation between level of schooling in laborers and increase in GDP per capita (Jess & Spiegel, 1994, pp. 143-173) , and  Klenow and Rodriguez- Clare (1997) and Barro and Sala-i-Martin (1995) also found no relationship between growth per capita and the change in secondary schooling and higher schooling years.  An empirical evidence that the average growth decrement from the 1960s to 1990s despite the increase in education levels supports the claim made by these researchers. What could explain these results? It is argued by scholars that expanding education resulted in large school systems of low quality in many developing countries.  School facilities were of poor quality, teachers were incompetent, and learning materials became insufficient in number. High proportion of children enrolled in the school, but there was a low, if any, competition among the students. It was evident that provision of schools and high enrollment were insufficient for quality education (Williams & Cummings, 2005, p. XVII).

However, Economist Gregory Mankiw of Harvard, revising on an earlier work by Barro, Sala-I –Martin and himself in 1995 and by Romer, Weil and himself in 1992 suggested that income in long run is determined by saving in form of physical and human capital. He had used the percentage of children in secondary school as his measure of human capital. In his research there is strong evidence to suggest that “as much as 78 percent of the per capita income differences among countries is due to human capital” (Mankiw, 1995, pp. 275-326).  There are several contradiction to Mankiw’s proposition though. For instance, nine times higher per capita income of USA in 2000 over Ukraine in same period does not comply with the 97 percent secondary enrollment of United States to 92 percent secondary enrollment in Ukraine (Easterly, 2001, p. 74).

In what was a counterargument to claim about poor correlation between education and development in poor developing countries, the 1997 World Development Report of the World Bank attributed that the commitment of East Asian countries’ to public funding for basic education was the basis of their economic development (Easterly, 2001, p. 72). What could possibly explain different end results in different countries with different economic standards? Acemoglu & Robinson (2013) make a claim that implementation of policies and courses of action are problems associated with political and educational institutions. In their book, Why Nations Fail, they write:

 Implementing meaningful changes is a difficult task when institutions are the cause of the problems in the first place. It is not always the corrupt politicians or powerful business undermining institutional reforms, but rather the local administrative officers and teachers who were able to sabotage development economists’ scheme… Attempting to engineer prosperity without confronting root cause of the problem is unlikely to bear fruit. (Acemoglu & Robinson, 2013, p. 450)

Researchers on the field of education propose two prominent theories which may explain root causes of failure of implementing good educational system, in addition to institutions. Demand theory asserts that demand for education emerges and supply follows only when there is a real demand for the skills generated from education. When there is a supply of educated labor and no demand for it, there will be a decrease in quality of education as parents will not care about their children’s education because they know that the benefits from education are low (Banerjee & Duflo, 2011, pp. 72-76). In a milieu where there is no demand for educated human capital, and thus no incentive for being in school, “students will goof off in the classroom or sometimes not show up at all, parents will often pull their children away to work on the farm, and the teachers will spend their time away as overqualified babysitters” (Easterly, 2001, p. 82). Furthermore, the lack of demand means that country will “have highly educated taxi drivers”, or that country will faces a problem of brain drain through immigration of educated human capital to rich countries where they can get better value of their education. Conversely, incentive theory tells us that “having the government force [students] to go to school does not change [students’ and their parents’] incentives to invest in future” (Easterly, 2001, pp. 72-73). But when there is a demand for educated human capital, an economy with incentives to invest in the future will be created. Then, the enrollment in school will go up, parents will show interest in their children’s education and teachers will have better incentive to teach well.  Government should facilitate an environment in which investing in business requiring educated manpower is made easier (Easterly, 2001, pp. 72-82).

References:
Acemoglu, D., & Robinson, J. A. (2013). Why Nation Fails. New York: Crown Bussiness.
Banjaree, A. V., & Duflo, E. (2011). Poor Economics. New York: publicaffairs in paper.

Brown, G. (2014, September 3). How Can Every Child Get an Education. Retrieved from World Economic Forum: http://forumblog.org/2014/09/universal-education/

Easterly, W. (2001). The Elusive Quest for Growth. Cambridge, Massachuttes : The MIT Press.

Fischer, P., & Berger, N. (2014). A Well-Educated Workforce Is Key to State Prosperity. Washington DC: Economic Policy Institute. Retrieved November 16, 2014, from http://www.epi.org/publication/states-education-productivity-growth-foundations/

Jess, B., & Spiegel, M. (1994). Role of Human Capital in Economic Development Evidence from Aggregate Cross- Country Data. Journal of Monetary Economics 34, 143-173.

Lee, J.-W., & Franciscob, R. (2012). Human capital accumulation in emerging Asia, 1970–2030. Japan and the World Econmy Volume 24, Issue 2, 76-86.

Mankiw, G. N. (1995). The Growth of Nations. Brookings Papers on Economic Activity 1, 275-326.

Pritchett, L. (1999, April). What Education Production Function Really Show: A Positive Theory of Education Spending. Economics of Education Review 18.2, pp. 223-239.

Pscacharopoulous, G. (1994). Return to Investment in Education : A global Update. World Development 22, 1325-1343.

Wha, L. J. (2014, September 16). Why we must invest more in education. Retrieved from World Economic Forum: http://forumblog.org/2014/09/invest-in-education-income-inequality/

Williams, J. H., & Cummings, W. K. (2005). Policy Making for Education Reform in Developing Countries Volume I. Maryland: Scarecrow Education.