Malawi - Development of human capital

Report No. 3462-MAIFILE COPY Malawi The Development of Human Capital May 8, 1981 Eastern Africa Regional Office FOR OFFICIAL USE ONLY Document of the Wbrld Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents mav not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Kwacha (K) Exchange Rate Kwacha 1 = US$ US$1 = Kwacha Average 1973 1.2206 0.8193 Average 1974 1.1888 0.8412 Average 1975 1.1577 0.8638 Average 1976 1.0953 0.9130 Average 1977 1.1075 0.9029 Average 1978 1.1851 0.8438 Average 1979 1.2241 0.8169 ABBREVIATIONS b - Unstandardized Regression Coefficient beta - Standarized Regression Coefficient CCAP - Church of Central Africa, Presyterian IEA - International Association for the Evaluat:.on of Educational Achievement JCE - Junior Certificate Examination (Taken After the Second Year of Secondary School) LDCs - Lesser Developed Countries; synonym: Lesser Industrialized Societies MCE - Malawi Certificate Examination (Taken After the Fourth Year of Secondary School and Roughly Parallel to the "O" Level Examina- tion in the United Kingdom) OECD - Organization for Economic Cooperation and Development p - The Degree of Statistical Significance r - Correlation Coefficient Rs - Social Rate of Return Rp - Private Rate of Return SES - Socioeconomic Status (Measured Usually by the Level of Parental Education, Occupation and Family Income). U - Unemployment FISCAL YEAR April 1 - March 30  i FOR OFFICIAL USE ONLY PREFACE 1. This report is one of a series of six special reports that have been produced as the result of the 1979 Basic Economic Mission.1/ The major purposes of the Basic Economic Mission were to review the performance of the Malawian economy since independence (1964) and to assess the future prospects for growth over the next decade or more, identifying the major constraints to development and making recommendations for their relief. The focus of the basic economic mission was upon macroeconomic performance (the national accounts, balance of payments, budget and public enterprises and employment), the development of agriculture and manufacturing; and the provision of government resources for the development of human capital and for meeting basic needs. 2. Despite the country's extremely low level of development at independence, the Malawi Government opted for an outward-looking strategy of rapid growth, based on encouragement of private enterprises, use of the -market mechanism, favorable treatment of foreign capital, low levels of protection and wage restraint. The public sector investment program has -emphasized the direct support of the commodity producing sectors through the provision of agricultural services, internal and external transport links and power. The development of the social sectors (education, health, etc.) received relatively less attention until recent years. 3. These policies have been successful and the Malaw-an economy has recorded an impressive list of accomplishments since independence. Real GDP has grown at about six percent per annum and growth in all sectors (except -subsistence agriculture) has been rapid. Wage employment has grown almost as rapidly as modern sector output, suggesting a relatively labor-intensive pattern of development. Export volumes, at least those of the agricultural estate sector, have increased significantly. Domestic investment has grown from about 9 percent of GDP at independence to an average of 25 percent in recent years, while domestic savings have increased from virtually rnil to 17 percent of GDP. The Malawian economy has also attracted large increases in foreign capital for private/public enterprise investments and for government projects. In addition, the domestic rate of inflation has been relatively low. 1/ The six reports are: The Development of the Agricultural Sector The Development of Manufacturing The Fiscal Performance of the Public Sector Employment Aspects of Economic Development The Development of Human Capital Basic Needs This document has a restricted distribution and may be used by recipients only in the performance of their offlcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  4. Despite this record of accomplishments, there is now concern about the prospects for future growth owing to: - the slow growth of smallholder output and exports; - the relatively poorer prospects for traditional estate exports; - the projected decline in the external terms of trade (relative to those of the 1970s); - the continued rapid growth of.population and labor force (and the rapid decline of unutilized cultivable land); - the deterioration in budgetary and public enterprise performance; and - the continued shortage of skilled manpower. 5. The basic economic report explores the possibilities for improving the output, trade, and employment performance of agriculture and industry through changes in price-tax-tariff policies, improvements in sectoral institutions, and improved government services. It analyzes the possibilities for improved resource management through better government revenue performance, increased allocations for recurrent operations to raise the payoffs to past government investments and measures to improve the efficiency and profitability of public -enterprises; it also analyzes the effects on future budgetary balance of changes in the growth and composition of government investment expenditure or in the amounts and terms of foreign financing. In addition, it assesses the nature and magnitude of Malawi's manpower constraint, estimates the returns to investments in secondary education, examines the costs of expanding social services for meeting basic needs and, in the face of likely government budgetary constraints, explores the possibilities for meeting some of these costs.through higher user charges. 6. The basic economic report places the themes outlined in the preceding paragraph in a macroeconomic framework for an analysis of the future economic -development possibilities in Malawi. We expect that the draft basic economic report will be discussed with Government in July 1981 and that circulation of the final version will shortly follow. The members of the basic economic mission were: William A. McCleary (Mission Chief) Gilbert Brown (Basic Needs) Peter Hansen (Public Finance) Kazuko Hashimoto (General Economist, Agriculture) Stephen Heyneman (Education) Richard LaCroix (Consultant, Agro-industry) Ben Lehbert (Industrial Economist) Katherine Sierra (Employment) Robert Wesselman (Consultant, Agricultural Extension) Dennis Wood (Consultant, Agro-industry) Shirin Velji (Research Assistant)  MALAWI THE DEVELOPMENT OF HUMAN CAPITAL Table of Contents Page No. Preface . .................................................. i Summary and Conclusions .. .................................. vi I. INTRODUCTION ..................................1 II. EDUCATIONAL BACKGROUND ..................................... 1 Pre-1960 ................................................... 1 1960 - 1979. 3 III. THE QUALITY OF HUMAN CAPITAL ............................... 7 Basic Cognitive Skills .. 7 Origins of Low Educational Achievement ........ .. ........... 10 Available Options .................... ...................... 13 IV. EDUCATIONAL INVESTMENTS AND ECONOMIC PRODUCTIVITY .... ...... 14 Background ................................................. 14 Social Rate of Return to Investments in Secondary Education .................. .................... 16 V. EDUCATION AND MERITOCRACY: THE EVIDENCE FROM MALAWI .... ... 25 Background ................................................. 25 The Determinants of Academic Achievement and Later Earnings ................................ .............. 28 VI. SU11MARY .................................................... 38 Finance .................................................... 38 The Level of Investment in Education and Training .......... 39 Educational Investments and Equality ......... .. ............ 42 LIST OF FIGURES 1. Basic Model for Estimating the Degree of Meritocracy in the Economy 2. Performance on JCE Mathematics and Parental Education (1976) This report was written by Mr. Stephen Heyneman, Sociologist/Educator, Education Department, Central Projects Staff.  Table of Contents, cont'd - iv - 3. Performance on MCE Mathematics and Parental Education (1976) 4. The Determinants of Academic Achievement in Malawi and in the United States, By Rank Order of Importance 5. The Determinants of Earnings in Malawi and in the United States, by Rank Order of Importance LIST OF TABLES 1. Government Expenditure per Pupil: 1927 and 1929 2. Proportion of the Population Literate in English and or a Vernacular Language 3. Primary School Enrollment in Malawi: 1911-1978 4. Enrollment in Secondary Schools in Malawi: 1948-1978 5. Number and Type of Volunteer Expatriate Personnel Serving in Malawian Secondary Schools, 1962-1970 6. Cost to the Malawi Government of Various Types of Secondary School Teachers, 1962-1970 7. Enrollment Growth in Higher Education: 1966-1978 8. Recurrent Costs of Postsecondary Education (1978) 9. Academic Achievement in Primary Schools in Malawi and 16 Other Countries 10. The Availability of Physical Facilities in Primary Schools: Mulanje and Nsanje Districts, 1979 11. Ratio of Primary School Pupils/Textbook in Nsanje and Mulanje Districts, 1979 12. The Occupation of Secondary School-leavers, 1976-1978 13. Occupation of Secondary School Students Two Years after Their 1976 JCE and MCE Examinations, by Exam success and Sex 14. Type of Employer Two Years after Leaving Secondary School 15. Distribution of Occupational Categories Two Years After Leaving Secondary School (1978) 16. Subsector of Employment Two Years after Leaving Secondary School (1978) 17. Earnings of Those in the Labor Force Two Years After Leaving Secondary School 18. Correlations Among Family Background, Education, and Labor Market Variables in Malawi, 1978 19. The Influence of Family Background and Education Variables on Secondary School Examination Success 20. The Influence of Family Background and Education Variables on Earnings 21. Average MCE and JCE Mathematics Performance by Level of Parental Education (1976) LIST OF ANNEXES 1. Cost of Primary School Supplies in Malawi (1979) 2. Malawi Book Service Primary School Textbook Price List 3. Malawi District Councils: Sources of Revenue  Table of Contents, cont'd - v - 4. School Fees Transferred to the Mulanje District Council and Goods Received by Primary Schools: FY78 and FY79 5. Primary School Student Questionnaire, 1979 6. Publications on or about IEA Data 7. References   - vi - MALAWI THE DEVELOPMENT OF HUMAN CAPITAL Summary and Conclusions Background i. The task of economic planning in the field of human capital is not just to judge the worthiness of education as an economic investment; much invest- ment is clearly needed to provide the skills necessary for economic development. Rather the more complex task of planning human capital investments is to guage amounts, timing and emphasis: how much resources, when, at what returns, and at what level; whether more quality or quantity; and whether on skills specific to a vocation or on skills generalizable from one vocation to another. ii. A fair amount of descriptive evidence already exists on the distribu- tion of education and training in Malawi. The IBRD Sector Survey published in 1978 presents the normal comprehensive figures on progression rates, capital and recurrent costs, and the enrollments in training programs under a variety of governmental and non-government auspices. Similarly, the appraisal reports for the First, Second and Third Education Projects supported by the IBRD present the usual intensity of evidence on manpower projections for specialized skills and the like. On the other hand, there has been no previous work done on the economic returns to educational investments at any level; there is no available information on cognitive attainments; nor is there information available as to the relationship between education and an individual