Distinguished Lectures

Lessons from the Mexican Crisis for Reforming Economies

Publication Number: ECES-DLS1-E&A

April, 1996

Author : Eliana Cardoso

Type : Distinguished Lectures

Is there a link between human capital accumulation, growth and equity? Why did Latin America fail to generate the same level of economic and social returns from their expenditures on education and other social services as East Asia? What is the best approach to reforming the education system? Birdsall and Londono address these questions in this publication and explore the relevance of the findings for Egypt. The authors go beyond the new growth theories, which acknowledge the importance of human capital accumulation to economic growth, to tackle such questions as: what makes households invest in human capital, do government expenditures on education help the poor, and will higher government expenditure on education automatically embrace all programs and income groups, including the poor, without a conscious effort? Finally, the authors question which model is relatively more efficient in delivering the education services: government, the market or a hybrid of both? They show that there is a strong positive link between human capital accumulation, growth and equity. They attribute the failure in Latin America in the past to regressive patterns of public spending on social programs, a historic policy bias against labor and private investment in education, and an inefficient centralized bureaucratic approach to the delivery of education services. They also propose a new approach to reforming the education system, which combines government-mandated standards with market-led competitive supply.