Wage rentals for reproducible human capital: evidence from Ghana and the Ivory Coast

Abstract

Education, child nutrition, adult health/nutrition, and labor mobility are critical factors in achieving recent sustained growth in factor productivity. To compare the contribution of these four human capital inputs, an expanded specification of the wage function is estimated from household (LSMS) surveys of the Ivory Coast and Ghana. Specification tests assess whether the human capital inputs are exogenous, and instrumental variable techniques are used to estimate the wage function. Smaller panels from the Ivory Coast imply the magnitude of measurement error in the human capital inputs and provide more efficient instruments to estimate the wage equation. The conclusion emerges that weight-for-height and height are endogenous, particularly prone to measurement error, and heterogeneous in their effects on wages. Overall returns to these four forms of human capital are similar within each country for men and women, but education and migration returns are higher in the more rapidly growing Ivory Coast, and the wage effects of child nutrition proxied by height are greater in poorer, more malnourished Ghana.