IMF paper on HC and Economic Development
An econometric International Monetary Fund (IMF) study entitled "HC and Economic Development" recommends that countries invest in the education of their citizens in order to ensure stable and sustainable development.
"A country that does not invest in education cannot develop," contends the study.
The study argues that natural resources are time-limited riches, whereas the benefit of an educated society never diminishes. The societal education level is an element that directly affects economic development.
The determining factors in how well-educated a country's citizenry can become are the infrastructure of the education system and the rate of attendance. The IMF study therefore indicates that investment in a modern education system suitable for its citizens should be a country's top priority.
The study also reminds readers that there is intense competition among nations. Only those nations with an educated labor force will be able to compete effectively and produce products and services of high value.
No country has achieved sustained economic development without investment in education. But do all types of HC affect growth identically? And which types of schooling-secondary or tertiary-should public policy promote? The paper develops an analytical framework to address these questions. It shows how the composition of HC stock determines a country's development. Hence, promoting the "wrong" type of schooling can have little effect on development. In addition, the paper helps in understanding why empirical studies have failed to find a significant relationship between schooling and growth.
Download the paper. If you're afraid of formulas you'd better skip the last part :-)