Human Development Traps and Economic Growth

Human capabilities play an important part in the emergence from stagnation to modern economic growth. Historical and macroeconomic studies show substantial effects for nutrition and health on income levels and, for poorer countries, on rates of growth, implying divergence. Cross-country examination of the joint dynamics of life expectancy and income shows that a stratified emergence from stagnation continues today, marked by barriers to basic human development and to productivity. These observations are explained by a model in which human development interacts with technological change and is characterized by a sequence of market failures. These dynamic, intergenerational, human development traps make economic growth slower, stratified and transitional. A microeconomic study on Mexico finds evidence for an economy-wide, intergenerational, low human capital trap consistent with this model. The effects found for early child development on the acquisition of education, and therefore on adult income, are commensurate with the historical and macroeconomic findings mentioned above.