Cover Image
close this bookChronic Energy Deficiency : Consequences and Related Issues (International Dietary Energy Consultative Group - IDECG, 1987, 201 pages)
close this folderMethodology of field studies related to socioeconomic effects of chronic energy deficiency
close this folder4. Human capital studies
View the document(introductory text...)
View the document4.1. Methodological aspects
View the document4.2. Analytical limitations

4.2. Analytical limitations

We can distinguish two groups of analytical limitations in relation to human capital studies which can be expected to produce underestimates of the human capital formation effects of CED (Table 2). In several instances, and depending on the study design, the effect on the human capital formation estimate cannot be known a priori. Intertemporal behavioral assumptions are likely to underestimate the effect on human capital formation in a cross-sectional design, and to a lesser extent in a longitudinal design (with or without supplementation).

In the cross-sectional design, increased social mobility as a result of higher levels of human capital formation is assumed not to take place, primarily because the analysis is in most case done within homogeneous occupational groups. Increased social mobility is likely to have an income-effect which, if ignored, leads to an underestimation of human capital formation. Assuming that the time-period over which measurements are made is sufficiently long, increased social mobility can be measured.

The final effect of human capital formation is conditioned by interactions with exogenous socioeconomic, cultural and other factors. In cross-sectional designs in which these interactions are ignored, the effect on the estimate of human capital formation is a priori unknown, while in longitudinal designs the actual estimate of human capital formation should reflect at least the measurable interactions with exogenous factors.

Table 2. Analytical limitations of human capital studies and their effect on estimates of human capital formation


Analytical limitations

EFFECT ON ESTIMATES OF HUMAN CAPITAL FORMATION


Cross-sectional design

Longitudinal design with or without supplementation

A. Intertemporal behavioral assumptions:

1. Social mobility

Underestimate

Included

2. External socioeconomic factors

Unknown

Included

3. Income effect on human capital formation

Underestimate

Included

4. Individual preferences for income and leisure at different levels of nutritional intake

Underestimate

Included

5. Interrelationship among individual labor supply and consumption functions of household members

Unknown

Included

B. Quantification problems:

1. Psychic income from leisure

Underestimate

Underestimate

2. Wealth management

Underestimate

Underestimate

3. Variation in nutritional status encountered in homogenous group

Underestimate

Underestimate

4. Internal rate of return measured

Possible only if food intake is

Possible

An initial investment in the human capital of an individual may have an income-effect which in turn may have secondary human capital formation and income-effects. This multiplier effect is ignored in cross-sectional designs, but can be included, conceptually at least, in longitudinal designs.

In the cross-sectional design of human capital studies, it is assumed that individual relative preferences for income and leisure remain constant with human capital formation. Labor supply theory would predict an increase in supply of labor time as the marginal productivity of the worker increases. This may lead to an underestimation of human capital formation in cross-sectional studies, but not necessarily in longitudinal studies, in which the labor supply response is directly measurable.

Interrelationships among individual labor supply and consumption functions of individual household members may have as a result that improvements in the energy status of one household member induce human capital formation in other household members. There is, however, no solid empirical evidence of this. In the Philippines' supplementation study (DE GUZMAN et al., 1985) the household as a whole, rather than an individual household member, was provided with a food ration because of the postulated interrelationship of consumption functions among individual household members.

Human capital studies suffer from certain quantification problems, independently of whether a cross-sectional or a longitudinal study design is employed. More intensive use of leisure time is likely to render additional returns in what economists call "psychic income" which is difficult to measure. Better wealth management (not very relevant to low-income populations) may result from human capital formation, and these returns are usually not measured. Cross-sectional designs depend on the variation in energy status which they encounter in the study sample. Given that these samples are normally quite homogeneous, this variation may be expected to be small. Furthermore, field studies of this kind involve another measurement bias: they are undertaken on workers who are actually employed and who are not necessarily representative of the total adult population in a developing country. Among those members of the adult population at the lowest end of the distribution of human capital (poor health and body composition, no skills, etc.), the same improvements in energy status may represent more human capital formation than in employed workers.

Internal rate-of-return analysis is possible with longitudinal studies when supplementation is involved. When no supplementation is involved, daily food intake needs to be measured over time and costed using market prices. In cross-sectional studies, body composition indicators have mostly been used, which does not allow for an internal rate-of-return analysis.

Clearly longitudinal studies with a long measurement period are preferable to cross-sectional designs, but are also a great deal more costly and complex.