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Trends in Human Capital Formation in Developing Countries: Background

Written by: OECD Development Centre

Article Overview: The level of human capital in developing countries has on average improved over the past three decades, owing to enhanced government commitments in formal education and vocational training as well as increased incentives of firms to provide enterprise training.

Trends in Human Capital Formation in Developing Countries: Background

The level of human capital in developing countries has on average improved over
the past three decades, owing to enhanced government commitments in formal
education and vocational training as well as increased incentives of firms to provide
enterprise training. Section II.3 describes recent trends in human capital formation,
highlighting general trends and regional disparities. Trends in human capital are reflected
in numerous educational indicators including adult literacy and educational attainment of the adult working age population. While education level of the working age population
provides a picture of the current state of human capital, focusing on the present state of
education among students and training activities among enterprise workers sheds light
on the future prospects of human capital. To this end, the current state of education and
training is also described.

Trends in Human Capital
Adult literacy is one of the common indicators used to capture an important, yet
limited, aspect of human capital in developing countries. The benefit of this indicator is
that it is, in general, readily available in most countries and is relatively easy to compare
across different countries and regions. It is, however, also quite a limited indicator in the
sense that it fails to capture many intricate features implied in worker skills and
productivity. Adult literacy is thus considered to be a good indicator to capture some
extent of human capital for least developed countries where a large fraction of the adult
population lacks basic education. For these countries, alternative indicators such as
educational attainment are not informative since it tends to be very low in many countries
with small variances. According to UNESCO (2002), adult literacy7 in developing
countries has improved substantially over the past 20 years. That is, the literate working
age population increased from 70 per cent (of total working population) in 1980 to 80 per
cent in 2000. However, the remaining 20 per cent of illiterate adults in 2000, a large
fraction of whom are female and are concentrated in highly populated developing
countries in South and East Asia8, is yet a non-trivial concern among policy makers.
Formal education in developing countries has become widespread over the past
three decades, owing to an increased awareness among policy makers and individuals
of the importance of this issue. The major event in this context is the global initiative
called Education for All, an intergovernmental effort to increase quality and quantity of
basic schooling in developing countries. All these past efforts have led to an increased
educational attainment among the working-age population in developing countries.
Table II.5 shows cross-regional trends in average years of schooling among the workingage
population. It indicates that all developing regions show substantial gains in average
school years. There are, however, large cross-regional disparities, with Latin American
and the Caribbean (LAC) and East Asia and the Pacific (EAP) regions making significant
gains while South Asia (SA) and sub-Saharan Africa (SSA) achieve only modest gains.

Since most workers in developing countries, and in particular the least developed
countries, have at most basic schooling, numbers in Table II.5 do not clearly indicate the
extent of an adult’s school attainment at the upper-secondary and tertiary level. Table II.6
thus presents an adult’s educational attainment at the post-basic schooling level.
Although sample countries are rather limited, it provides some insights to the extent and
the regional disparities of post-compulsory schooling. First, consistent with trends in the
average school attainment (Table II.5), the LAC-region shows the highest post-basic
school attainment for the working-age population. The African region is presumably
largely behind LAC and EAP regions, in the light of the fact that Tunisia is among the
countries in Africa with relatively high educational attainment. Table II.6 also indicates
large intraregional disparities with stark differences in post-basic school attainment
between Chile and Paraguay for the LAC-region and between Malaysia and Thailand for
the EAP-region.

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  Preface: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  Questions Posed: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  HUMAN RESOURCE DEVELOPMENT AND ATTRACTING INWARD FDI
  Prospects of Human Capital in the Future: Background

Article Tags: adult literacy, adult population, age population, basic education, current state, developing countries, education level, educational attainment, educational indicators, formal education, future prospects, government commitments, human capital formation, incentives, least developed countries, regional disparities, three decades, unesco, variances, vocational training



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