Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Indian Economic Development: Human Capital Formation in India

Question:

Poor countries tend to be unhealthy, and unhealthy countries tend to be poor. Across the broad swath of history, improvements in income have come hand-in-hand with improvements in health. Further, the poorest countries of the world are in the tropics, an area rife with tropical disease. These stylized facts lead to a natural question: does disease hold back development? It seems possible that it would. Health is a kind of human capital as well as an input to producing other forms of human capital. Being unhealthly depresses the ability to work productively and/or the ability and incentives to invest in human capital. Taken together, these mechanisms imply that worse health implies lower income. The correlation between health and development is hard to interpret simply as the causal effect of health on income. Third factors such as bad government or geographic disadvantages might impede both productivity and disease control. Health is also a normal good: when people get richer, they invest more in their own health, and exhort their governments to spend more on public health. The correlation between health and income might be one of circular and cumulative causation: health affects income and income affects health and so on.

Which among the following is not the source of human capital formation?

Options:

Expenditure on health

On-the-job training

Expenditure on migration

Expenditure on building factories 

Correct Answer:

Expenditure on building factories 

Explanation:

Expenditure on building machines is a form of expanding physical capital and not human capital. Investment in education is considered as one of the main sources of human capital. There are several other sources as well. Investments in health, on- thejob training, migration and information are the other sources of human capital formation.