Working Paper 37 - The Formation of Human Capital and the Economic Development of Africa: Returns to Health and Schooling Investments

This paper first outlines a framework within which to assess the contribution of health and schooling to increasing individual and aggregate income, as well as the possible feedback of increasing income on the demand for human resources. It then evaluates how African countries have fared from 1970 to 1985 in terms of survival and schooling, compared with other countries, to place in perspective areas of achievement and the aggregate composition of human capital formation in the African region. Several microeconomic studies are then described in more detail that illustrate the magnitudes of private returns to health and schooling in West Africa, some of the consequences of the rationed supply of schooling in South Africa, and evidence of returns to the quality of schooling. The concluding section extracts lessons as to how to conduct country-specific research based on merged household and community surveys to estimate the key parameters describing the private and social returns to marginal investments in health, education, and mobility.