**Policy, Research, and External Affairs**

**Women In Development** WPS 725

This paper -a product of the Womeni in Development Division, Population and Human Resources Department -is part of a larger effort in PRE to detennine if and how women's productivity (and thus family welfare) are improved when women are given more access to education, training, credit, health care, andotherpublic resources. Copies are available free from the World Bank, 1818 H StreetNW, Washington DC 20433. Please contact Audrey Sloan, room S9-121, extension 35108 (43 pages, with tables). Explanations of lower investments in female Gill and Khandker test these propositions schooling and health than in male assume that using primary and secondary school enrollment demand for these components of human capital ratios and life expectancy levels (as proxies for somehow exists - and they concentrate on the investments and schooling and health) for about supply of human capital by the household. 90 countries in 1965 and 1987. The data tor 1965 Gill and Khandker test these propositions using primary and secondary school enrollment ratios and life expectancy levels (as proxies for investments and schooling and health) for about 90 countries in 1965 and 1987. The data tor 1965 appear to be broadly supportive of the propositions; data f)r 1987 support tlhem only weakly.

Gill and Khandker try to remedy the neglect of demand-side factors by examining exogenous dimensions of development. They include the - structure of production represented by the shares of agriculture, services, and industry in national employment or income - as an identifying variable for the demand for human capital.

The cmpirical analysis cannot determine whether changes in the economic structure cause increases in the demand for education, or whether improved education facilitates a largely exogenous transition from an agrarian to an industrial/service economy. If issues of causality are resolved in favor of the views Gill and Khandker express in this paper, interesting policy implications emerge.

Their reasoning is that the production functions of these three sectors differ in their requirements for skills. Industry and services require more educated workers than agriculture does - and industry requires more full-time educated workers than services does.

Most important, expansion of the services sector would greatly help reduce gender inequity at the same time as fostering growth.

The authors assume that women have a comparative advantage over men in the home sector, so womeni spend more time at home. But industry favors males over females more than the services sector does. If the importance of industry increases at the expense of agriculture, the demand for schooling will increase for both men and women, but especially for men. Increases in the importance of services will similarly increase the demand for schooling more for women than for men.

This finding highlights the problem with relying purely on economic growth to reduce the gender gap in human capital. If income growth is accompanied by structural transformation of an economy from agrarian to industrial and then to domination by the services sector, there is no assurance that the economic status of women will improve in the early stages of this transformation.

Because the human capital of women has - significant externalities that is, because social returns to women's education and health are - higher than private retums the case is strong for direct goveniment intervention in investments in women's human capital.

If health is equally valued by all sectors, but health and schooling are complementary inputs to production, changes in production that encourage more schooling for men (or women) will also encourage more investments in health for men (or women).

The PRE Working Paper Serics disseminates the findings of work under way in thc Bank's P'olicy, Rcscarch, and Extemal AffairsComplex. Anobjectiveofthescries is to geithesefindingsout quickly, cven if presentations arlc ess than fully polished. The findings, interpretations, and conclusions in these papers do not necessarily represent official Bank policy.

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