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The Role of the State and the Market in Poverty Eradication Minquan - - PowerPoint PPT Presentation
The Role of the State and the Market in Poverty Eradication Minquan - - PowerPoint PPT Presentation
The Role of the State and the Market in Poverty Eradication Minquan Liu Center for Human and Economic Development Studies (CHEDS), Peking University Expert Group Meeting on Poverty Eradication, UNDESA and ILO, 20-22 June, 2011, Geneva.
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- 1. The Poverty-Growth-Inequality Triangle
Bourguignon, 2004
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- 2. Development as Human Capital
Accumulation
The key to tackling this triangle and achieving development and poverty reduction in the long run lies with human capital accumulation (health and education)
A large body of theoretical and empirical literature indicates that human capital, rather than physical capital, accumulation is a much more powerful force driving forward development, especially in an age of rapid innovations and knowledge-intensive industries.
Health and education are after all among the basic capabilities that people pursue
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- 3. The Kuznets Curve and Long-
run Development
The Kuznets Curve in the long run: economic structural changes and urbanization
The new literature of endogenous inequalities: financial capital and occupational choice
Earnings inequality and segmented labor markets
Wage share statistics
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- 4. A Stylized Model
The above indicates that if there is anything central to development and poverty reduction in the long run, it is human capital accumulation, especially education.
A model of segmented unskilled and skilled labor markets
Development as upward integration of these two labor markets through education
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Labor Market for the Unskilled
OA SA WAR MA W LA
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Figure 3: Labor Market for the Skilled
OI SI WAR MI W LI WIR
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OA OI N SA SI WAR WIR MA MI WI* W W M L
Labor Markets for the Skilled and Unskilled at the Start of Development
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OA OI SA SI WAR WIR MA MI WI* W W M L, N WA
*
Development as Skill Formation through Education
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- 5. Full and Successful Development
Full development
Full development and the Kuznets Curve
Successful development
Successful development and poverty eradication
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- 6. The Role of the Market and the State in
Development and Poverty Eradication
Market and state failures
The education market: the demand side
Do I know future returns from investment
Can I borrow against future incomes: the capital market imperfections
Private returns and social returns: externalities
The education market: the supply side
Do I know future demand for places
Do I know future demand for quality
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- 6. The Role of the Market and the State in
Development and Poverty Eradication
Three ways of intervening in the market:
Regulation
PPP
Partially substituting the market
The case for public investment in education
Supply side: investment in facilities and personnel
Demand side: in some sense equity-based entitlements
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- 6. The Role of the Market and the State in
Development and Poverty Eradication
But also the role of the government in shaping and leading things (or as they say in political science: steering)
The market is, unfortunately, not designed to do this
Markets are best at reacting to things (this is after all what the price signal is there for)
The government must exercise good vision, commitment and leadership
Practical need for planning in matters of education
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- 6. The Role of the Market and the State in
Development and Poverty Eradication
Some beneficial loops of education:
Impact of education on demand for skilled labor
Clustering and agglomeration effects
Reputation effects
Impact of education on fertility
The East Asian experience:
The NIE
China
Implications for poverty eradication
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