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Are Returns to Investment Lower for the Poor? Human and Physical Capital Interactions in Rural Vietnam
Author(s) -
Walle Dominique van de
Publication year - 2003
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00214
Subject(s) - economics , human capital , investment (military) , labour economics , argument (complex analysis) , capital (architecture) , rate of return , demographic economics , economic growth , finance , geography , biochemistry , chemistry , archaeology , politics , political science , law
If the gains from investment depend on knowledge, but households cannot hire skills, then poorly educated households will achieve lower returns than educated ones. If the income‐poor are less well educated, then they will also have lower returns to investment. The paper tests this argument for the case of irrigation in Vietnam, a setting where existing irrigation can be treated as exogenous at the household level with appropriate controls for the determinants of facility placement. Strong complementarities between household education and irrigation expansion suggest that, unless disparities in education are redressed, reforms will generate an inequitable growth process in Vietnam.