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HUMAN CAPITAL: Health – Poverty Trap Application to

Nutrition and Productivity

Quoted from one article, a “health poverty trap” among rural households in third world
country and a framework of minimum health improvement and household productivity
indicators that are tailored by social cultural situations. It is an attempt to identify the
underlying nature and causes of persistent poverty in third world country. Non economic
community and intra household variables and relationships influence utilization of preventive
health services and household productivity capacity. Social cultural factors which affect the
distribution of family labor, alcoholism, food insecurity and poor nutrition, poor hygiene, and
woman participation in the household must be included in poverty reduction and health
promotion agendas of rural in third world country.

The recent increase in the awareness and interest in the multidimensional nature of
poverty is a departure from the exclusive consideration of income and consumption shortfalls
of a predetermined basic minimum level (Tsui Kai-yuen, 2000). However, in practice the
monetary approach mostly retains its dominance in description and analysis, both nationally
and internationally (Ruggeri Laderchi et al 2003; Bourguigon et al 2003). This is frequently the
case for studies on poverty dynamics (Tony, Hulme, and Kanbur 2008). Without
underestimating the weight of economics, we should consider the non-economics aspects of
deprivation in the broadest sense (Shepherd 2007; Woolcock 2007).

According to Robyn and Durrhein (2007) poverty dimensions include; life expectancy,
caloric intake, height and weight, formal education, literacy, health, access to public goods,
adequate housing, employment, the environmental impact and income. By definition poor
people have fewer resources, and may be forced to sell what assets n they have, including land
and livestock, or borrow at high interest rates to deal with an immediate crisis caused by health
problems. Despite these explanations, the causal relations in poverty trends are complex,
health as a poverty dimension continues to have cross cutting characteristics that encompasses
productive capacity as well as other direct and indirect costs.
While ill health and poverty are mutually reinforcing and can generate a vicious circle of deterioration
and suffering, studies are often concentrated on how poverty is bad for health (Kawachi and Kennedy,
1997). The predominant explanations and theories on the relationship between health and poverty at a
micro level present a unidirectional representation such as how modest out-of-pocket costs for health
services can drive families in poverty (Whitehead et al, 2001). The experience in many low income
countries continues to suggest that ill health is not only a manifestation of poverty; it is also a cause and

HUMAN CAPITAL: Health – Poverty Trap Application to

Nutrition and Productivity

a key human development indicator (Haines et al, 2000; Kanbur and Muhaondwa 1986; Zhang and
zhang, 2005).

Therefore, a health poverty trap will be introduced as an indicator of how poor health
conditions and poverty reinforce each other, making it difficult for poor population groups with
health problems to break out poverty. This can also be seen as insufficient economic
productivity of individuals, households and the entire community, due to persistent poor health
conditions. About 20 per cent of developing country’s mainly rural population still lives under
conditions of chronic poverty, despite high economic growth rates and successful poverty
reduction strategies.


Characteristics of the poor poor health outcomes Diminished income

-Inadequate service utilization - Ill healthy - Low productivity

Unhealthy sanitary and dietary - malnutrition - Loss of wages
Practice, etc. – cost of health care
-Greater vulnerability
- Lack of income
- Poverty in community social norms, weak
Institution and infrastructure, bad environment
- Poor health provision- inaccessible, lacks
Key inputs, irreverent services, low quality
- Exclusion from health finance system- limited
Insurance, co-payments

HUMAN CAPITAL: Health – Poverty Trap Application to

Nutrition and Productivity

The national poverty reduction priorities are health (public health care), education, rural feeder
roads and safe and clean water. The government’s 2004/2005 and 2007/2008 poverty
eradication action (PEAP) aim at achieving increase in per capita income and consumption,
reversal of the growing inequality trends and raising savings of the poor. While education,
water and sanitation are important, household (material and child) health status have remained
both necessary condition and a prerequisite for development and household’s economic status.
In developing nation ill health continues to be named as a cause of poverty.

While Health is the key component of an individual’s welfare and struggle of living.
Sickness and ill health, and the risk of death, are central issues in the shaping human
capabilities and behavior. There is therefore a strong argument for health spending on the
grounds that it has a direct effect on human wellbeing and happiness.
The market for health is special and the provision of health often requires a large
element of involvement by government. Infections diseases have obvious externalities that
create a large public interest in their control. In addition, the uncertainty of the occurrence of ill
health, and the large medical bills that it may lead to, creates a need for insurance or borrowing
to finance health expenditures. however, market failure is common in health insurance or
borrowing to credit market, often due to differences in information between the market
provider and the customer. Government regulation and intervention in health, in an effort to
overcome these market failures, is widespread.
in developing countries, the most effective methods of improving health require public
sector involvement. In developing countries, the main cause of ill health and premature
mortality are infections diseases. These can tackle effectively through the provision of clean
water and sanitation systems and wide scale vaccination programs.
However, developing countries have limited budgets and there are many sectors in
which there is a need for government spending. In particular, there is a strong case that poorer
countries should concentrate their government spending on investment that leads to economic
growth; spending on current consumption may lead to welfare gains today but does nothing to
cure the long – term problems of poverty. Government spending on education, transport and
communication infrastructure, and on legal institutions that ensure personal security and
property rights can be shown to have a positive impact on economic growth. It can be argued
that spending on health delays such investments.

HUMAN CAPITAL: Health – Poverty Trap Application to

Nutrition and Productivity

In this research paper health is not the only a consumption good that adds to wellbeing,
but also an investment good that increases the future productive power of individuals and the
economy. Health has a direct effect on the productivity of workers. The worker productivity is
the main mechanisms put forward by the world health organization (2001-2002) to justify
increase transfers to developing countries for health spending. However, there are also more
indirect mechanisms through which health can influence productivity. These indirect
mechanisms, while less obvious, may be more important in practice.
One indirect mechanism is that health can be a complementary input to other forms of
human capital. There is a great deal of empirical evidence that productivity and wages rise with
education levels and worker job experience. These returns may be higher for healthy workers
so that the gains from education and work experience increase mainly to healthy workers who
are working. In addition, these higher returns may induce greater investment in education and
on the job training when workers are healthy. Ill health and premature death essentially lead to
wasted investment in human capital and reduce the incentive to invest in people.
Another indirect benefit of improvements in health is that prospective lifespan of healthier
workers is longer. Long lifespans increase the need for retirement income. In countries with low
life expectancy the prospect of retiring is remote. Once longer lifespans become common,
retirement becomes a real possibility and workers have to consider saving for their retirement.
In developed longevity can generate the need for retirement income and set off a saving and
investment boom.

HUMAN CAPITAL: Health – Poverty Trap Application to

Nutrition and Productivity

Human capital refers to skills of a worker.

Investing in human capital, therefore, will increase the skills. For example, when a firm pay for
its employees' college degrees, it's investing in human capital.
According to economic dictionary (Tahir et al., 1993), human capital means all productive
investments in a person such ability, skill, expertise and health as a result of investment towards
education, training and health care. Human capital growth, mainly in education is one of the
largest sources of economic growth both in the past and in times to come. Based on some research
done in the past, human capital has made larger contribution to a country's growth compared to
contribution from factories and physical property. Human capital although not tangible will always
be the most valuable asset of an individual.

Human capital is a way of defining and categorizing peoples' skills and abilities as used in
employment and otherwise contribute to the economy. Many early economic theories refer to
it simply as labor, one of three factors of
production, and consider it to be a commodity -- homogeneous and easily interchangeable. But
conceptions of labor are more sophisticated

other interesting ideas

from Karl Marx
-that to have interest a person must work
-the profits goes to the employer and not the worker
really read the article it could help you with anymore questions you might have on it. which
would save you time and energy, therefore allowing you to make money.

HUMAN CAPITAL: Health – Poverty Trap Application to

Nutrition and Productivity

Human Capital to Poverty

One goal of economic development is improvements in the health and education of

people since these fields are critical to the development process. While these fields have
high values in themselves, they also help with a person’s ability to produce. This
increase in productivity, and hence income, in turn lifts individuals out of poverty.
Factors such as health, nutrition, and formal education, which an individual
embodies and which provide future returns, are components of what is coined as
“human capital”. At the same time, as mentioned above, one should recognize that
these factors are consumables as well. As such, an increase in a person’s income will in
turn lead to an increase in the demand for these components of human capital given
that they are normal goods.

The present study empirically examines the impact of the various components of human capital
as well as that of income on the poverty rate and income inequality in developing countries.
Statistical results of such empirical examination will assist governments in those countries
identify areas that need to be improved upon in order to alleviate poverty and improve the
distribution of income. Taking into consideration the two-way causality between income and
human capital, we include interaction variables in order to eliminate the simultaneity bias and
obtain superior statistical.

Nutrition in Relation to Human Capital.

Improving nutrition contributes to productivity, economic development, and poverty reduction

by improving physical work capacity, cognitive development, school performance, and health
by reducing disease and mortality. Poor nutrition perpetuates the cycle of poverty and
malnutrition through three main routes— direct losses in productivity from poor physical status
and losses caused by disease linked with malnutrition; indirect losses from poor cognitive
development and losses in schooling; and losses caused by increased health care costs. The
economic costs of malnutrition are very high—several billion dollars a year in terms of lost
gross domestic product (GDP). Relying on markets and economic growth alone means it will
take more than a generation to solve the problem. But specific investments can accelerate
improvement, especially programs for micronutrient fortification and supplementation and
community-based growth promotion. The economic returns to investing in such programs are
very high.

HUMAN CAPITAL: Health – Poverty Trap Application to

Nutrition and Productivity

• Improving nutrition increases productivity and economic growth.

• Not addressing malnutrition has high costs in terms of higher budget outlays as well as lost
• Returns from programs for improving nutrition far outweigh their costs.

Good nutrition is a basic building block of human capital and, as such, contributes to economic
development. In turn, sustainable and equitable growth in developing countries will convert
these countries to “developed” states.1 There is much evidence that nutrition and economic
development have a two-way relationship. Improved economic development contributes to
improved nutrition (albeit at a very modest pace), but more importantly, improved nutrition
drives stronger economic growth. Furthermore, as quantified in the Copenhagen Consensus,
productivity losses caused by malnutrition are linked to three kinds of losses—those due to:
• Direct losses in physical productivity.
• Indirect losses from poor cognitive losses and loss in schooling.
• Losses in resources from increased health care costs.
Therefore, malnutrition hampers both the physical capacity to perform work as well as earning

Human capital in Productivity

The purpose of human capital is to increase wealth. Plain and simple. The more people work
the more they make and the more taxes collected. Education in general is the mechanism for
increasing human capital. For example, a smoker learns that cigarettes are bad. He then quits,
which in turn makes him miss less work. He gets a better pay check and pays more taxes. If that
same smoker keeps smoking, he pays less taxes and later on will pull money out of some
program to pay for his healthcare issues, i.e. Medicare or Medicaid. It would be better to
educate him than for him to contribute less than he is taking from government programs. In
reality these economic terms are to express concern in a business kind of way over what
happens to someone and how we can extract more money from him. To you and I, we must go
about it the other way. Instead of focusing on money, we should be focusing on our own lives.
Is our life productive? Are we what we could be?

HUMAN CAPITAL: Health – Poverty Trap Application to

Nutrition and Productivity

#Let see why productivity is so important in relation to health

 When a nation’s workers are very productive, real GDP is large
and income are high.
 when productivity grows rapidly, so do living standards.
 What, then determines productivity and its growth rate?
We might ask what is productivity is? While recall one of the ten principles from economics
Productivity is a country’s standard of living depends on its ability to produce g&s.
This ability depends on productivity, the average quantity of g&s produced per unit of labor
input. Remember that productivity going to higher when the average worker has more capital.
(machines, equipment, etc.) i.e. an increase in K/L causes an increase in Y/L.

Most companies when times turn difficult de-invest in human capital. It is a relatively painless
way for management to match their cost structure to their income structure. They do not
generally invest in human capital until they think that they need to do so or until some
department head convinces his/her boss that it would be advantageous to do so. There has
been a good deal of de-investing going on lately.\

Therefore, poverty and health promotion interventions, in the socio-culture sphere focus on
long term results and the elimination of underlying social barriers to household productive
capacity and improved health, may become the break through a health poverty trap. Partly due
to the predominance of income measures, poverty reduction interventions are constrained by
expectations to produce short-term results. However, only a long term perspective on pro-poor
policies is realistic in reaching a higher sustainable level of welfare for the poorest rural groups.
Only then will the poor and marginalized be able to take responsibility of their livelihoods and
contribute actively to interventions that are effective in improving their livelihoods.

HUMAN CAPITAL: Health – Poverty Trap Application to

Nutrition and Productivity


BARRO, R., 1996, ‘‘Health and Economic Growth’’, mimeo, Harvard University.

BARRO, R., 1997, Determinants of Economic Growth: A Cross-country Empirical Study, Lionel
Robbins Lectures. Cambridge, MA: MIT Press.

Barrientos, A. 2007. "Does vulnerability create poverty traps?" Manchester: IDPM/Chronic

Poverty Research Centre (CPRC). Working Paper 76.

Deaton, A., (1997), THE ANALYSIS OF HOUSEHOLD SURVEYS: A Microeconomic Approach to

Development Policy, John Hopkins University Press.

Dreze, J., and Sen, A., (1991), Hunger and Public Action, WIDER Studies in Economics, Clarendon

Goujon, Anne and W Lutz. 2004. Future Human Capital: Population Projections by level of
Education, Edited by W. Lutz. UK and USA: Earth scan.