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Rates of return on physical and human capital in Africa's manufacturing sector

Author

Listed:
  • Arne Bigsten
  • Paul Collier
  • Stefan Dercon
  • Marcel Fafchamps
  • Bernard Gauthier
  • Jan Willem Gunning
  • Anders Isaksson
  • Abena Oduro
  • Remco Oostendorp
  • Catherine Pattillo
  • Måns Söderbom
  • Francis Teal
  • Albert Zeufack

Abstract

In this paper two sets of issues are addressed using panel data from the manufacturing sector of five African countries. First, how high are the returns to human relative to physical capital. Second, what is the relative importance of technology and endowments of human and physical capital in determining differences in earnings and productivity across the countries. Evidence from earnings functions shows that the private returns to both experience and education rise with the level of education. Private returns rise from 3 per cent at the primary level, to 10 per cent at the secondary level and 35 per cent for tertiary. Evidence from the production function gives lower returns on education than from the earnings function. Rates of return on physical capital exceed 20 per cent and greatly exceed the average return on human capital. Data is available on the stocks of human and physical capital across the countries. Productivity and earnings differentials are shown to be large between Cameroon and Ghana. These differences are due almost entirely to differences in physical, not human, capital endowments.

Suggested Citation

  • Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Anders Isaksson & Abena Oduro & Remco Oostendorp & Catherine Pattillo & Måns Söderbom & Francis, 1998. "Rates of return on physical and human capital in Africa's manufacturing sector," CSAE Working Paper Series 1998-12, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:1998-12
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    References listed on IDEAS

    as
    1. Geeta Gandhi Kingdon, 1998. "Does the labour market explain lower female schooling in India?," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 39-65.
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    More about this item

    Keywords

    investment; human capital; African manufacturing;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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