differential fertility human capital and development using micro data from 48 developing countries this paper studies changes in crosssectional patterns of fertility and child investment over the course of the demographic transition before 1960 children from larger families obtained more education in large part because they had richer and more educated parents by century s end these patterns had reversed consequently fertility differentials by income and education historically raised the average education of the next generation but they now reduce it while the reversal is unrelated to changes in gdp per capita women s work sectoral composition or health roughly half is attributable to rising aggregate education in the parents generation the results support a model in which rising skill returns lowered the minimum income at which parents invest in education

precautionary savings and self selection evidence from the german reunification experiment in the absence of complete insurance expected future income shocks lead prudent individuals to build up precautionary savings in order to avoid wide fluctuations in the consumption path the reaction of savings to expected future shocks is stronger the more risk averse an individual is risk aversion might influence not only the savings behavior of an individual facing a stochastic income path but it can also affect occupational choice in the first place in particular risk averse individuals might choose occupations that are associated with less risky income paths while less risk averse individuals might prefer occupations with higher income risk assessing the importance of self selection of individuals into occupations according to their risk aversion is difficult since risk aversion is usually unobserved yet failing to control for unobserved risk aversion in regressions of wealth on measures of labor income risk will lead to a bias if selfselection takes place since measures of labor income risk will be negatively correlated with the error term that is capturing the unobserved risk aversion this could lead to a rejection of the theory of precautionary savings even if individuals act according to the theory

how the new international goal for child mortality is unfair to sub saharan africa again summary the sustainable development goals sdgs include level end goals for both under five and neonatal mortality to be obtained by 2030 no more than 25 and 12 deaths per 1 000 births respectively recent accelerations in the rate of reduction in under five mortality have been cited as a cause for optimism in this paper we show that changes in mortality rates are subject to mean reversion hence high rates observed recently for sub saharan africa make for an overly optimistic estimate of future reductions taking this into account in projecting mortality rates until 2030 we find that only very few countries in sub saharan africa are likely to attain the new targets while a majority of countries elsewhere are likely to attain the target or have done so already we also show that while mdg4 has been rightly criticized as unfair to sub saharan africa in the past a relative target may have been more appropriate today and would be relevant for all countries we also offer a discussion of likely challenges the region faces in making further inroads against preventable deaths

introduction understanding structural transformation in africa summary the limitations of neo classical growth models have led to a resurgence of interest in dual economy models and structural change structural change entails the movement of labor from low productivity sectors like agriculture into more modern sectors of the economy because the share of the labor force in agriculture is so high in most of sub saharan africa the potential for structural change to lead to growth and poverty alleviation in africa appears to be enormous yet very little of this new literature on structural change focuses on africa this special issue begins to fill that gap the first half of this special issue contains five original contributions that provide new insights with respect to the nature of africa s growth over the past two decades the second half contains six original contributions that examine opportunities for structural transformation in africa

the drivers of structural change the main goal of this paper is to provide an integrated survey of the literature devoted to identifying the drivers of structural change broadly defined as the process of reallocation of economic activity across the three broad sectors agriculture manufacturing and services using the ggdc 10 sector database this paper first presents the empirical facts associated with structural change in different regions of the world that is europe and the usa asia latin america and africa then reviews four determinants of structural change i changes in income ii changes in relative sectoral prices iii changes in input output linkages and iv changes in comparative advantage s via globalization and trade

the growth of exhaustion management plans policies and decisions must fit the given stage of societal evolution a good policy e g at a time of innovation in a kondratiev or hegemonic cycle structure may be a counterintuitively bad and dangerous policy at a time of saturation and exhaustion of ideas the nature of the kondratiev and hegemonic cycles structures is further examined from the perspective of the life cycle of collective intelligence and knowledge effective intelligence and knowledge are themselves considered to be evolving macrostructures a view much different from both the shannon weaver and computer science perspectives but a view much more consonant with modern dynamic systems theory some untoward experiences with the use of models in energy management during the falling leg of kondratiev number four are noted the origin and exhaustion of contemporary problemsolving approaches are discussed from a theoretical perspective and some thoughts on a possible fifth kondratiev recovery given in conclusion the main theory is synopsized and some brief recommendations made for further thinking about operational research modeling

evolutionary theories in environmental and resource economics approaches and applications recent advances in evolutionary theory have important implications for environmental economics a short overview is offered of evolutionarythinking in economics subsequently major concepts and approaches inevolutionary biology and evolutionary economics are presented andcompared attention is devoted among others to darwinian selection punctuated equilibrium sorting mechanisms lamarckian evolution coevolution and self organization basic features of evolution such assustained change irreversible change unpredictability qualitativechange and disequilibrium are examined it is argued that there are anumber of fundamental differences as well as similarities betweenbiological and economic evolution next some general implications ofevolutionary thinking for environmental economics are outlined this isfollowed by a more detailed examination of potential uses ofevolutionary theories in specific areas of environmental economics including sustainability and long run development theories technologyand environment ecosystem management and resilience spatial evolutionand environmental processes and design of environmental policy

the quantity and quality of life and the evolution of world inequality gdp per capita is usually used to proxy for the quality of life of individuals living in different countries welfare is also affected by quantity of life however as represented by longevity this paper incorporates longevity into an overall assessment of the evolution of cross country inequality and shows that it is quantitatively important the absence of reduction in cross country inequality up to the 1990s documented in previous work is in stark contrast to the reduction in inequality after incorporating gains in longevity throughout the post world war ii period health contributed to reduce significantly welfare inequality across countries this paper derives valuation formulas for infra marginal changes in longevity and computes a full growth rate that incorporates the gains in health experienced by 96 countries for the period between 1960 and 2000 incorporating longevity gains changes traditional results countries starting with lower income tended to grow faster than countries starting with higher income we estimate an average yearly growth in full income of 4 1 percent for the poorest 50 percent of countries in 1960 of which 1 7 percentage points are due to health as opposed to a growth of 2 6 percent for the richest 50 percent of countries of which only 0 4 percentage points are due to health additionally we decompose changes in life expectancy into changes attributable to 13 broad groups of causes of death and three age groups we show that mortality from infectious respiratory and digestive diseases congenital perinatal and ill defined conditions mostly concentrated before age 20 and between ages 20 and 50 is responsible for most of the reduction in life expectancy inequality at the same time the recent effect of aids together with reductions in mortality after age 50 due to nervous system senses organs heart and circulatory diseases contributed to increase health inequality across countries

reinventing foreign aid for inclusive and sustainable development kuznets piketty and the great policy reversal this survey essay reviews over 200 papers in arguing that in order to achieve sustainable and inclusive development foreign aid should not orient developing countries towards industrialisation in the perspective of kuznets but in the view of piketty abandoning the former s view that inequality will fall with progress in industrialisation and placing more emphasis on inequality in foreign aid policy will lead to more sustainable development outcomes inter alia mitigate short term poverty address concerns of burgeoning population growth train recipient governments on inclusive development fight corruption and mismanagement and avoid the shortfalls of celebrated kuznets conjectures we discuss how the essay addresses post 2015 development challenges and provide foreign aid policy instruments with which discussed objectives can be achieved in summary the essay provides useful policy measures to avoid past pitfalls output may be growing and yet the mass of the people may be becoming poorer lewis 1955 lewis led all developing countries to water proverbially speaking some african countries have so far chosen not to drink amavilah 2014 piketty 2014 has led all developing countries to the stream again and a challenging policy syndrome of our time is how foreign aid can help them to drink

the lazarus drug the impact of antiretroviral therapy on economic growth abstract does better population health lead to growth in per capita income theory is ambiguous and empirical evidence is very limited in 2001 a steep fall in antiretroviral arv drug prices triggered rapid and massive expansion of arv therapy coverage in lower income countries exploiting the sharp resultant changes in population health i show that arv therapy coverage expansion led to growth in gdp per capita the positive effects on growth most likely persist for around four years arv therapy coverage expansion could explain around a third of the sub saharan african growth miracle

staunching emigration from east germany age and the determinants of migration following the unification of germany in 1990 eastern wages and unemployment both rose rapidly i demonstrate that rising wages reduced eastern emigration greatly while rising unemployment had little effect this reflects the behavior of the young who are very sensitive to source region wages and relatively insensitive to source unemployment i show that most of the effect of source unemployment comes from the contemporaneous effect on those laid off who are more likely to be older i find that compared to stayers young emigrants are much more skilled older emigrants are slightly more skilled and commuters are not more skilled as measured by education and pre move wages my conclusions are based on a comparison of results from aggregate inter state migration data and individual data from the eastern sample of the german socio economic panel for 1990 2000 jel j61 p23

climate shocks and exports this paper uses international trade data to examine the effects of climate shocks on economic activity we examine panel models relating the annual growth rate of a country s exports in a particular product category to the country s weather in that year we find that a poor country being 1 degree celsius warmer in a given year reduces the growth rate of that country s exports by between 2 0 and 5 7 percentage points with no detectable effects in rich countries we find negative effects of temperature on exports of both agricultural products and light manufacturing products with little apparent effects on heavy industry or raw materials the results confirm large negative effects of temperature on poor countries economies and suggest that temperature affects a much wider range of economic activity than conventionally thought this abstract was borrowed from another version of this item

inequality the urban rural gap and migration using population and product consumption data from the demographic and health surveys i construct comparable measures of inequality and migration for 65 countries including some of the poorest countries in the world i find that the urban rural gap accounts for 40 of mean country inequality and much of its cross country variation one out of every four or five individuals raised in rural areas moves to urban areas as a young adult where they earn much higher incomes than nonmigrant rural permanent residents equally one out of every four or five individuals raised in urban areas moves to rural areas as a young adult where they earn much lower incomes than their nonmigrant urban cousins these flows and relative incomes are suggestive of a world where the population sorts itself geographically on the basis of its human capital and skill i show that a simple model of this sort explains the urban rural gap in living standards

transitions in the german labor market structure and crisis abstract since the so called hartz iv reforms around 2005 and during the global crisis of 2008 2009 the german labor market featured mainly declining unemployment rates we develop a search and matching model with heterogeneous skills to explore the role of structural and cyclical policies for this performance calibrating unemployment benefits to approximate legislation before and after the reforms we find a large reduction in unemployment and its duration with the transition concluding after about three years during the crisis the extended use of short time labor subsidies that prevent jobs from being destroyed is likely to have prevented strong increases in unemployment

modelling complex human systems a fisheries example abstract the basis of current models used in fishery management is briefly examined and various shortcomings are discussed alternative dynamic models are described which are based on the data available for the nova scotia groundfish fisheries it is shown that human responses can amplify relatively small annual environmental fluctuations leading to large quasi cyclic changes in catch and profit in a detailed spatial model it is shown that stochastic behaviour on the part of some fishermen is necessary for the survival of the fishery and that the efficiency and size of the industry depends very much on the information flows concerning catch a very general discussion is given which shows how these ideas are important in our understanding of innovation and discovery in general terms

direct estimation of hidden earnings evidence from russian administrative data abstractwe employ unique administrative data from moscow to obtain a direct estimate of hidden incomes our approach is based on comparing employer reported earnings to market values of cars owned by the corresponding individuals and their households we detect few hidden earnings in most foreign owned firms and larger firms especially state owned enterprises in heavily regulated industries the same empirical strategy indicates that up to 80 percent of earnings of car owners in the private sector are hidden especially in smaller companies and industries such as trade and services where cash flows are easier to manipulate we also find considerable hidden earnings in government services our approach sheds new light on the decline in the gross domestic product gdp in russia after the collapse of communism and subsequent recovery in particular we argue that a good deal of these changes might represent changes in income reporting rather than actual changes in gdp

lights camera income illuminating the national accounts household surveys debate gdp per capita and household survey means present conflicting pictures of the rate of economic development in emerging countries one of the areas in which the national accounts household surveys debate is key is the measurement of developing world poverty we propose a data driven method to assess the relative quality of gdp per capita and survey means by comparing them to the evolution of satellite recorded nighttime lights our main assumption which is robust to a variety of specification checks is that the measurement error in nighttime lights is unrelated to the measurement errors in either national accounts or survey means we obtain estimates of weights on national accounts and survey means in an optimal proxy for true income these weights are very large for national accounts and very modest for survey means we conclusively reject the null hypothesis that the optimal weight on surveys is greater than the optimal weight on national accounts and we generally fail to reject the null hypothesis that the optimal weight on surveys is zero additionally we provide evidence that national accounts are good indicators of desirable outcomes for the poor such as longer life expectancy better education and access to safe water and we show that surveys appear to perform worse in developing countries that are richer and that are growing faster therefore we interpret our results as providing support for estimates of world poverty that are based on national accounts jel code i32

statistical tragedy in africa evaluating the data base for african economic development measurement is increasingly at the centre of debates in african economic development some remarkable upward revisions of gdp which are signs of statistical systems improving caused the declaration of a statistical tragedy in africa this special issue evaluates the database for african economic development with articles on the quality of the data on gdp health and education poverty labour agriculture and income distribution

economic growth size of the agricultural sector and urbanization in africa this paper uses variations in international commodity prices and rainfall to construct instrumental variables estimates of the within country effect that changes in the size of the agricultural sector and gdp per capita growth have on the urbanization rate for a panel of 41 african countries during the period 1960 2007 the paper s three main findings are that i decreases in the share of agricultural value added lead to a significant increase in the urbanization rate ii conditional on changes in the share of agricultural value added gdp per capita growth does not significantly affect the urbanization rate iii increases in the urbanization rate had a significant negative average effect on gdp per capita growth

temperature changes household consumption and internal migration evidence from tanzania large rural urban wage gaps observed in many developing countries are suggestive of barriers to migration that keep potential migrants in rural areas using long panel data spanning nearly two decades i study the extent to which migration rates are constrained by liquidity constraints in rural tanzania the analysis begins by quantifying the impact of weather variation on household welfare the results show how household consumption co moves with temperature rendering households vulnerable to local weather events these temperature induced income shocks are then found to inhibit long term migration among men thus preventing them from tapping into the opportunities brought about by geographical mobility

targeted characteristics and use of socially marketed preventive health goods evidence from condoms in sub saharan africa social marketing is a popular method for allocating targeted publicly funded preventive health goods in poor countries however low demand among targeted groups may inhibit take up relative to non

oil price shocks income and democracy he effect of natural resource wealth and income on political institutions is a central issue at the intersection of economics and political sciences we contribute to this research by examining the effect of international oil price fluctuations on democratic institutions over the 1960 2007 period we also exploit the very persistent response of aggregate income to oil prices to study the effect of persistent oil price driven income shocks on democracy our results indicate that countries with greater net oil exports over gdp see improvements in democratic institutions following upturns in international oil prices for example positive oil price shocks lead to improvements in the polity democracy score as well as the subscores for executive constraints executive recruitment and political competition and a higher probability of a democratic transition we estimate that an oil price driven 1 percentage point increase in per capita gdp growth increases the polity democracy score by around 0 2 percentage points on impact and by around 2 percentage points in the long run the effect on the probability of a democratic transition is around 0 4 percentage points our work relates to the literature on the link between political institutions and natural resource wealth and income an influential early contribution is lipset 1959 who documents that high income countries tend to be more democratic he argues that this positive correlation arises because higher per capita income is a symptom of the modernization of society and that modernization also increases citizens demand for political participation the positive association between income and democracy has also been emphasized by huntington 1991 who holds that higher per capita income was one of the key factors behind the

the african growth miracle measures of real consumption based on the ownership of durable goods the quality of housing the health and mortality of children the education of youths and the allocation of female time in the household indicate that sub saharan living standards have for the past two decades been growing about 3 4 3 7 percent per year that is three and a half to four times the rate indicated in international data sets

evolutionary policies for sustainable development adaptive flexibility and risk minimising abstract an evolutionary perspective on policies to foster sustainable development is presented it is argued that policies suggested by the traditional economic theory of environmental policy can stimulate unsustainable socio economic structures and patterns in addition they are unable to remove undesired locked in systems and technologies drawing on evolutionary thinking characterised by diversity selection innovation path dependence and bounded rationality an alternative partly complementary theory of environmental policy is suggested specific attention is given to the role of strategies that are aimed at increasing diversity and adaptive flexibility and at reducing risk

explaining the evolution of poverty the case of mozambique we provide a comprehensive approach for analyzing the evolution of poverty using mozambique as a case study bringing together data from disparate sources we develop a novel back casting framework that links a dynamic computable general equilibrium model to a micro simulation poverty module this framework provides a new approach to explaining and decomposing the evolution of poverty as well as to examining rigorously the coherence between poverty economic growth and inequality outcomes finally various simple but useful and rarely applied approaches to considering regional changes in poverty rates are presented copyright 2012 oxford university press

on the simultaneity problem in the aid and growth debate this paper shows that foreign aid has a significant positive average effect on real per capita gross domestic product gdp growth if and only if the quantitatively large negative reverse causal effect of per capita gdp growth on foreign aid is adjusted for in the growth regression instrumental variables estimates show that a 1 percentage point increase in gdp per capita growth decreased foreign aid by over 4 adjusting for this quantitatively large negative reverse causal effect of economic growth on foreign aid shows that a 1 increase in foreign aid increased real per capita gdp growth by around 0 1 percentage points

a brief review of some problems in using national accounts data in level of output comparisons and growth studies abstract after an initial burst of enthusiasm for establishing their national accounts 30 or 40 years ago some countries have made continuous improvements while others have done little to maintain even their initial system presently most developing countries make their basic estimate of gdp from the production side and most do not have adequate surveys to permit a consistency check of their production and expenditure side estimates the base surveys for expenditures and production are typically over ten years old and the lags in basic surveys for constructing constant price estimates are frequently longer a number of countries estimate their growth from a weighted average of volume indexes and make no attempt at direct deflation many of those that do deflate their current expenditure estimates do so at a very aggregate level users of national accounts should be aware of the varying quality of the estimates across countries and hopefully continual questioning of the numbers will help to encourage improvement

fuel for economic growth abstract using data for 134 countries we document that countries deriving a larger share of their energy from fossil fuel are richer and grow faster we then set up an endogenous growth model where final output is produced with a non energy and two substitutable energy intermediate goods fossil fuel and biofuel with non energy and energy goods being gross complements and with higher costs for improving the energy efficiency for biofuel than for fossil fuel there exist two balanced growth paths one with low growth where energy is derived from biofuel and one with high growth where energy is sourced from fossil fuel heterogeneity in initial technology levels can generate the great divergence the demand for fossil fuel in technologically advanced countries drives up its price thereby reducing demand for fossil fuel in less advanced countries that instead choose the more stagnant energy input

population size and civil conflict risk is there a causal link does an expansion of the population size expose nation states to a higher risk of suffering from civil conflict obtaining empirical evidence for a causal relationship is difficult due to reverse effects and omitted variable bias this article addresses causality issues by using randomly occurring drought as an instrumental variable to generate exogenous variation in population size for a panel of 37 sub saharan countries over the period 1981 2004 instrumental variable estimates yield that a 5 increase in population size raises the risk of civil conflict by around six percentage points

commuting migration housing and labour markets complex interactions commuting migration housing and labour markets are important for the overall economy and for the everyday life of many people commuting makes up a large part of all journeys world wide and many resourcedemanding transport investment projects are initiated to cope with this type of travelling in a range of countries increasing flows of national and international migration are central determinants of demographic developments in industrialised countries the working age population or those aspiring to be part of the economically active population constitute a large proportion of the total population consequently income earned through working represents a major component of total earnings in these economies cahuc and zylberberg 2004 in order to obtain an efficient labour market workers should locate and relocate to where the relevant jobs are to be found from an economic point of view commuting and migration are essential elements for obtaining a well functioning labour market fischer et al 1996 lux and sunega 2012 zabel 2012 finally housing is a basic good and for many people rents or loan repayments make up a relatively large proportion of their overall budget oecd 2011 moreover housing represents a dominating element of homeowners wealth or equity due to its central role during the financial and economic crisis starting around 2007 it has become clear that housing prices are important for the development of the overall economy in many countries for example muellbauer and murphy 2008 zabel 2012 housing and labour markets are linked in many ways when explaining these links it is useful to start with some of the distinguished features of housing markets as already mentioned houses frequently constitute a major part of households wealth moreover earned income from employment is a major

regional labor markets network externalities and migration the case of german reunification fifteen years after german reunification the facts about slow regional convergence have born out the prediction of barro 1991 except that migration out of east germany has not slowed down i document that in particular the 18 29 year old are leaving east germany and that the emigration has accelerated in recent years to understand these patterns i provide an extension of the standard labor search model by allowing for migration and network externalities in that theory two equilibria can result one with a high networking rate high average labor productivity low unemployment and no emigration west germany and one with a low networking rate low average labor productivity high unemployment and a constant rate of emigration east germany the model does not imply any obviously sound policies to move from the weakly networked equilibrium to the highly networked equilibrium this abstract was borrowed from another version of this item

diet transformation in africa the case of ethiopia africa s food systems are changing fast amid rapid economic growth emerging urbanization and structural transformation in this study we use four rounds of nationally representative data from ethiopia to document changes in household food consumption patterns over a period of unprecedented economic growth we find that while the share of food in the total consumption basket is declining food quantities and calorie intakes have considerably increased between 1996 and 2011 a decomposition analysis suggests that this was mostly driven by improvements in household incomes a finding that is consistent across the calorie distribution also the content of the food basket is changing with a gradual shift toward high value foods such as animal products fruits and vegetables and processed foods overall this diet transformation has important implications for the food security debate and for agricultural and food policy in the country

the collapse and recovery of the capital share in east germany after 1989 after the 1990 unification east germany s capital income share plunged to 15 2 in 1991 then increased to 37 4 by 2015 to account for these large changes in the capital share i model an economy that gains access to a higher productivity technology embodied in new plants as existing low productivity plants decrease production the capital share varies due to the nonconvex production technology plants require a minimum amount of labor to produce output two policies transfers and government mandated wage increases have opposite effects on output growth but contribute to lowering the capital share early in the transition jel e20 e25 o11

the changing structure of africa s economies data from the groningen growth and development center s africa sector database and the demographic and health surveys reveals that much of africa s recent growth and poverty reduction has been associated with a substantive decline in the share of the labor force engaged in agriculture this decline is most pronounced for rural females over the age of 25 who have a primary education it has been accompanied by a systematic increase in the productivity of the labor force as it has moved from low productivity agriculture to higher productivity services and manufacturing although the employment share in manufacturing is not expanding rapidly in most of the low income african countries the employment share in manufacturing has not peaked and is still expanding albeit from very low levels more work is needed to understand the implications of these shifts in employment shares for future growth and development in africa south of the sahara

the caring hand that cripples the east german labor market after reunification abstract the caring hand that cripples the east german labour market after reunification the east german labour market has hardly made any progress since german reunification despite massive migration flows and support from the west we argue that east germany is in trouble precisely because of the support it has received this paper explores the phenomenon of the caring hand that cripples arising from bargaining by proxy the adoption of the west german welfare system and the associated employment persistence even the steady decrease of labour cost normalized by productivity since the beginning of the 1990s did not help to kick start the east we suggest that labour force participants fell into traps concerning low skills ageing of the workforce labour saving capital and skills capital underutilization and unemployment arising from the decline of the tradeable sector jel classification e24 j3 and p2 keywords german unification labour market traps and labour markets dennis j snower kiel institute for the world economy dusternbrooker weg 120 24105 kiel germany tel 49 431 8814 235 fax 49 431 8814 501 email dennis snower ifw kiel de

labor productivity and employment gaps in sub saharan africa drawing on a new set of nationally representative internationally comparable household surveys this paper provides an overview of key features of structural transformation labor allocation and labor productivity in four african economies new micro based measures of sector labor allocation and cross sector productivity differentials describe the incentives households face when allocating their labor these measures are similar to national accounts based measures that are typically used to characterize structural changes in african economies however because agricultural workers supply far fewer hours of labor per year than do workers in other sectors productivity gaps disappear almost entirely when expressed on a per hour basis what look like large productivity gaps in national accounts data could really be employment gaps calling into question the prospective gains that laborers can achieve through structural transformation these employment gaps along with the strong linkages observed between rural non farm activities and primary agricultural production highlight agriculture s continued relevance to structural change in sub saharan africa

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded