The central business district in Nigeria's commercial capital of Lagos. Photo by: REUTERS/Nyancho NwaNri

Policymakers must decide which policies, programs, and investments are most likely to help drive sustainable economic growth. Public resources may be invested in a variety of inputs, including human capital development through health care and education, as well as physical infrastructure in the form of roads, electrification, and information technology.

Policymakers should not consider investment and infrastructure a binary choice. The fact is that human capital development is fundamentally dependent on infrastructure. A solid foundation for economic growth requires a combination of these investments. But with limited resources, countries must determine where in the spectrum of human capital development to concentrate investments to get the best overall return and build the necessary supporting infrastructure.

In an effort to answer the question of how governments may reap the greatest economic benefits of public investments, the Harvard Ministerial Leadership Program commissioned a study to determine which human capital investments have the most potent influence on economic growth. This groundbreaking research can serve as guidance for ministers in prioritizing policies, programs, and investments to achieve the greatest economic opportunity for their populations.

Key findings

This original analysis builds on the existing evidence base for low- and middle-income countries by quantifying the association of improved general health, reproductive health, and education outcomes with economic growth. The key findings relevant to policymakers in LMICs are as follows:

1. A sustained one-child decrease in the total fertility rate corresponds to a 2 percentage point, or PP, increase in annual gross domestic product per capita growth in the short-run (5 years) and a 0.5 PP increase in the medium- to long-run (35 years).

2. A 10% increase in life expectancy at birth corresponds to a 1 PP increase in annual growth in the short-run and a 0.4 PP increase in the medium- to long-run.

3. A one-year increase in average years of schooling corresponds to a 0.7 PP increase in annual growth in the short-run and a 0.3 PP increase in the medium- to long-run.

Takeaways for policymakers

Human capital investments require policymakers to take a far-sighted perspective because the returns are less immediate than the political benefits of more tangible, shorter-term public investment projects.

Here are three key takeaways for policymakers, based on extant literature:

1. Reducing fertility has considerable potential to boost economic growth, particularly in above-replacement settings.

Reduced fertility offers very large economic returns over all time horizons. Providing universal access to quality sexual and reproductive health services can yield a return of $120 to $1.

2. Improving general health promotes economic growth.

Improvements in health will have a more appreciable impact on economic growth in settings in which health is initially poor. High-impact opportunities include reducing stunting among children under 5 — a 40% reduction yields a 59% return on investment — and investing in interventions for women’s health such as iodine supplementation and human papillomavirus vaccination.

3. Increasing education attainment and quality promotes economic growth and is interconnected with health and gender investments.

Education investments are relatively more potent in settings characterized by moderately good health. A one-year increase in average educational attainment is associated with 0.5 to 1.2 PP increase in annual GDP per capita growth. A 25-point improvement in the Programme for International Student Assessment score, a measure of educational quality, is similarly associated with a 0.5 PP increase in annual growth. High-impact opportunities include investing in primary education (22% social return), preprimary education (with estimates in the literature indicating a return as high as 33 times), and girls’ education (0.8-1% boost to economic growth from eliminating gender gaps in education).

The views in this opinion piece do not necessarily reflect Devex's editorial views.

About the author

  • Donald Kaberuka

    Dr. Donald Kaberuka is former president of the African Development Bank Group and current advisory board member of the Harvard Ministerial Leadership Program. As AfDB president, he was responsible for reducing poverty in Africa through spurring sustainable economic development and social progress in 54 member countries. Before joining AfDB, Dr. Kaberuka had a distinguished career in banking, international trade and development and government service. A national of Rwanda, he served as country minister of finance and economic planning between 1997 and 2005, setting the foundation for Rwanda’s historic economic development.