Title: The accumulation of human capital in developing countries
Funder: Economic and Social Research Council

Abstract: I will study the process of human capital accumulation among poor families in developing countries. Recent research in many disciplines has established that human capital, the set of physical capabilities (health, nutritional status) and cognitive and non-cognitive skills that make individuals productive, is key in the process of development, both at the level of the individuals and of societies. From a micro perspective, it is well established that human capital is multidimensional and its accumulation is a complex dynamic process that starts very early in the life of human. Indeed, there is mounting evidence that what happens from conception to 5 has long run consequences, in part because the level of development in the first few years affects the ability individuals have to develop further later in life. This type of dynamic phenomena is what economists call dynamic complementarities of investment in human capital. It is also increasingly clear that the first few years are particularly malleable. This implies that, if on the one hand children in difficult environments might be particularly vulnerable, on the other, the early years are particularly salient for policy interventions. Well- targeted and well-designed interventions in the early years can have long lasting effects sustained long after the intervention is concluded. I intend to answer some of the outstanding issues in the study of human capital accumulation during the early years of poor children in developing countries. My research is articulated around three related themes: (i) the study of what economist call the production function of human capital; While much is known about the factors that affect the growth of human capital, many outstanding issues (about the size of dynamic complementarities, about the interaction of different components of human capital and about effect of certain inputs) remain. (ii) The study of the investment decisions poor parents in developing countries make about their children's human capital. Parents invest time and money in their children's development. Modeling these choices and identifying what are the factors that affect them is key for the design of policies aimed at fostering human capital accumulation. Parental choices will react to policies and incentives in ways that might hinder or enhance their effects. (iii) The identification of distortions in the perceptions that poor parents might have of the human capital production function and of the returns to specific investments. Parent's distorted beliefs might induce wrong choices. By looking at parents choices in contexts where specific interventions (provided to a random subset of the population) change behaviour by changing information, one can identify both the 'distorted' perception parents might have and the actual production function of human capital and contrast them. The identification of such distorted perceptions can also be pursued by measuring directly individual beliefs. Regardless of the method used, the identification of individual beliefs and their possible distortion is key for the design of policy. The proposed research grows from several projects that I have been pursuing in the last few years and that have involved the design and evaluation (or the evaluation) of early childhood development interventions in developing countries. These activities have put me in the position of having the possibility of designing survey questionnaires and tailoring data to the needs of specific research questions. Many of the data sets I will use from several developing countries (Colombia, Malawi, India) have been collected within Randomized Control Trials to evaluate specific interventions. Therefore, the data contain variation that is by construction exogenous and that can be used to estimate the models I study. Most of the data sets I will use have a longitudinal dimension and contain measures of many aspects of children development.


Research activity codes: 1.2 PSYCHOLOGICAL AND SOCIOECONOMIC PROCESSES
Health categories: GENERIC HEALTH RELEVANCE