INVESTMENT IN HUMAN CAPITAL: PARAMETERS FOR DETERMINING A POLICY FOR ECONOMIC DEVELOPMENT

Abstract

Investment in Human Capital provides an increase in productivity, also leading to an improvement in the profile of income distribution in the long term. An increase in education investment is generally accompanied by higher spending on health and nutrition which later results in higher socioeconomic performance of the country. The most evident results are the following: • increased productivity; • increased mobility of the workforce for dynamic sectors, • lower population trough reduced fertility rate. A proposed action that would lead to increased investment in human capital then becomes an unquestionable opportunity since it raises the standard of the community life. However, it is always advisable to consider some limitations to these possibilities. The first one is linked to the fact that the return on investments in human capital varies according to the stage of development of each country, i.e., there is always a kind of inversion best recommended for each economy, which takes into account the particularities of national growth. The World Bank (1995) indicates that in countries where national product per capita is considered small (1 to $ 3,000), spending on health and nutrition provide better results in national productivity than investments made directly in formal teaching. In countries where per capita national product is considered of medium size (between 40 to 10 thousand dollars), the return rate on investments in higher education is higher. In areas where formal education is low, the best results come with the expansion of the school network and the improvement of the quality of basic education. In countries where education is better structured, educational investments in secondary and higher levels provide the best returns. The second condition is related to socioeconomic variables, depending on different development policies drawn from country to country. The rates of return of investment in human capital considering these aspects are greater when: • the level of economic activity is maintained through market equilibrium, • there is continuity to government economic policy action, prioritizing the operation of free market and • the country is integrated with world markets. One may also consider in this scenario, that the investments in human capital targeted to women generate results superior to those targeted to men. The reason is simple: increased education for women results in a greater contribution to the generation of professionals in health and nutrition, as well as providing a reduction in the fertility rate, which has a direct impact on population size and the improvement of the per capita income of the community. In Brazil there are virtually no specific studies involving the relationship between the level of health and nutrition and the ability to generate cash income. However, some correlation coefficients have been calculated and in all cases a strong inverse relationship between level of family income and nutrition degree is found. An important impact on per capita income is related to the family size in the country. National and World Bank research show that an increase in educational levels, particularly in women who play the role of family head, is associated with improved levels of health, nutrition and income of the family. In countries with big gaps in income concentration, especially among ethnic groups and rural areas, it is preferable to invest in human capital targeting the poor, as a consequence there's an increase in social welfare resulting from the improvement of the per capita income as well as the productivity of the workforce. The major limitation to this option is associated with the maturation time required for gestation of investment in Human Capital. Few of these investments present immediate results on productivity, income distribution and poverty reduction, although they are capable of producing high return rates. In this scenario, investment in human capital through training appears to be an exception since there are strong indications that its return occurs in a much shorter term, though it is advisable to undertake a careful analysis of the effects of training, region to region.