The development of education as an economic commodity has been prevalent for a long time now. The seminal work of Becker (1962) and Schultz(1962) presented a formal model of education that augmented the stock of human capital as an investment good. Educational choices were made by individuals similar to any other investment decision, all of which shared the common characteristic that an investment produces a flow of benefits through time. Following this, there was an overflow of econometric studies that attempted the rate measurement of return to education which was called the Mincerian approach.
In development and growth economics, the educational significance as an economic variable also has a distinguished history beginning with Lewis(1962). Without confining to a formal model, many have studied the questions related to the appropriate mix of skills, the type of education that should be stressed upon, the relationship between education and the economic capacity to take educated workers in productive employment.
Economic Development and Education in India
- The non-GDP dimension plays a very important role in developing countries like India.
- The development process is forced to resolve and tolerate issues such as inequality and exclusion on a multidimensional scale because of the increased diversity in the country.
- Reduction and elimination of issues such as poverty, gender discrimination, infant mortality, literacy, child labor, income inequality, and more have to be stressed by India as part of the country’s development agenda.
- In India, there are additional factors that hamper and impact the development process which is the division of caste and “untouchability”, difference of religion, language, to name a few that are of utmost importance.
Relating to a “new growth” model, Lucas suggested that,
“The productivity of any worker is higher when working in an environment peopled by other high productivity workers through a kind of learning by watching mechanism. It follows then that the growth path a region takes depends in part on the level of accumulated human capital at the start of the growth process.”
- The model given by Lucas can be used as a justification for educational subsidy due to the implicit positive externality that arises from education.
- Through cross country, empirical studies, Barro (1991) human capital has a positive influence on growth if other factors are under control.
- His analysis stressed the positive impact the growth of fairly basic education variables can bring through primary and secondary schooling.
- Chatterji (1998) also extended this view by including tertiary education and came up with a positive result.