Human Capital Investments in Pakistan: Implications of Micro Evidence from Rural Households

In: The Pakistan development review: PDR, Volume 36, Issue 4II, p. 695-712

Abstract

A number of cross-country studies suggest that the Pakistani
aggregate human capital investments, measured by educational
performance, are low relative to other countries of similar per capita
income levels. This paper investigates the implications of micro
evidence on schooling from rural Pakistan for an understanding of the
cases of low human capital investments. The results of school-entrant
and dropout regressions using household panel data indicate that the
permanent and transitory income movements affect children's schooling
behaviour, indicating credit market imperfections. Hence, the human
capital investments in rural Pakistan may be discouraged by poverty,
combined with incompletely insured income volatility. Moreover, our
analysis points out that there is a distinct gender difference in
education.