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a blog from young economists at Nova SBE

On the returns of education in Africa

            Human capital is a common term in economic analysis, and it is used in several fields of economics. Nevertheless it is not an old term, it was actually presented only in 1993 by Becker.[1]It was developed by analysing education not as a consumption good, but as an investment, which is probably the most reasonable way to analyse secondary and more even, tertiary education.

            Although in this model people are “capital”, normal microeconomic theory holds and we can analyse this as in any other model: ultimately, people will maximize their welfare. Given this, investors, (of education), will compare the gains of education, (greater productivity and higher wages in the future), with the costs of studying, (tuition for example, furthermore, time spend studying is time not receiving wage).

            A big problem for people to achieve the optimum level of education is liquidity constraints, but are these a serious problem in European countries for example? Most European governments have strong social concerns in what regards education, and allow most of the population to study.

            But let’s consider a third world country – in this scenario liquidity constraints are a serious concern, and it is well known that only a small part of the population is enrolled in secondary education, as it is observable in the following table, that present the values for sub-Saharan Africa enrolment in primary secondary and tertiary education:

























Source: the economics of Education, Daniele Checchi

The difference between primary education and both the subsequent types of education is astonishing. Is this only a result of liquidity constraints and lack of infrastructure in education? Checchi distinguish two types of education, one that creates minimum capability’s (primary), and one that can be perceived as an investment in human capital.

Let’s adapt behavioural theory, (people are averse to risk), to the lack of advanced education in sub-Saharan countries, and linking this with the human capital model presented by Becker: In this countries Risk is much higher –political institutions are frail, in most cases, and the state of nature where a person will be able to exert the knowledge acquired in superior education is not very likely. Furthermore Life expectancy at birth is low, what will also decrease the expected return from education (let’s consider together secondary and tertiary education, that I will designate as higher levels of education).

To illustrate this we can consider, probably the most striking case in this region, the second Congo war that occurred in Democratic Republic of Congo from 1998 to 2003, and resulted on the death of at least 2.5 million people, (the higher estimates go up to 5.4 million)[2]. This is one in many cases of conflicts in Africa. Given this scenario, it is likely that the liquidity constraints faced by individuals are not exerting any pressure in education, as the risk of the efforts to study bringing no benefit whatsoever is very high. So, investment in superior education is innocuous if there are no incentives for people to study. The same holds for cases of high unemployment for example.

All in all, uncertainty will lead to lower investment on education in Africa, and this will probably be more relevant than credit constraints.

[1] Source: the economics of Education, Daniele Checchi

[2] Bethany Lacina and Nils Petter Gleditsch, “Monitoring Trends in Global Combat: A New Dataset of Battle Deaths, European Journal of Population” (2005)


Maria Martins #540


Author: studentnovasbe

Master student in Nova Sbe

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