Measuring human capital in middle income countries

Asli Demirguc-Kunt and Iván Torre

Journal of Comparative Economics, 2022, vol. 50, issue 4, 1036-1067

Abstract: This paper develops an indicator that measures the level of human capital to address the specific education and health challenges faced by middle income countries. We apply this indicator to countries in Europe and Central Asia, where productive employment requires skills that are more prevalent among higher education graduates, and where good health is associated to low levels of adult health risk factors. The Europe and Central Asia Human Capital Index (ECA-HCI) extends the World Bank's Human Capital Index by adding a measure of quality-adjusted years of higher education to the original education component, and it includes the prevalence of three adult health risk factors—obesity, smoking, and heavy drinking—as an additional proxy for latent health status. The results show that children born today in the average country in Europe and Central Asia will be almost half as productive as they would have had they reached the benchmark of complete education and full health. Countries with good basic education outcomes do not necessarily have good higher education outcomes, and high prevalence of adult health risk factors can offset good education indicators. This extension of the Human Capital Index could also be useful for assessing the state of human capital in middle-income countries in general.

Keywords: Human capital; Education; Health; Europe and Central Asia (search for similar items in EconPapers)
JEL-codes: I1 I2 O1 O4 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:50:y:2022:i:4:p:1036-1067

DOI: 10.1016/j.jce.2022.05.007

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