Human Capital Investments

Improving schools is frequently high on the policy agenda of both developed and developing countries. The nature of the policy focus, however, differs across countries with some emphasizing increasing school attainment and others focusing on quality concerns. Until recently little evidence was very useful in helping decision makers to formulate appropriate schooling policies. In the last decade, however, there has been a dramatic increase in useful information about the role of human capital in development and about the ways in which governments can promote human capital formation. This paper reviews evidence on the economic impacts of human capital investment with an eye to where investment decisions might be made. While the evidence on actual impacts is quite clear, the evidence on how best to make the investments is less clear. Specifically, recent research underscores the prime importance of educational quality, as measured by cognitive achievement, and the much lower importance of pure school attainment. This research spans both developed and developing nations. On the other hand, on the key question is how cognitive achievemen