What is the difference between human capital and technology

Second, we need to foster resilient societies through social protection. In developing countries, especially in low-income countries, 90 percent of all workers are in informal jobs. In other words, they're not working for a company with benefits. Given the changing nature of jobs and skills, if other shocks are going to happen to the economy, how can we protect those people who are not linked to any formal job?

This is one of the big challenges when we think of the societal effects of automation. Technology can actually broaden the reach of social protection programs and cash transfers — a strategy that we know works to raise productivity and resilience among formal and informal workers. For example, the Aadhaar Program in India uses state of the art biometric technology to make it easier for the poor to prove their identity and to authenticate the beneficiaries of dozens of social programs.

At the same time, the government has been able to save billions of dollars by reducing fraud, a savings which more than covered the cost of the program. Another example of technology to expand social protection is the use of electronic smart cards to support , Syrian refugee households in Lebanon. The cards worked so well that we stepped in to distribute them to poor Lebanese as well. Now, those economies are using smart cards in ways that we wouldn't have imagined before.

None of these efforts will matter unless we invest more — and more effectively — in people. I have argued for a long time that we need more money for health and education. And it happened. But then leaders — especially Heads of State and Ministers of Finance — started perpetuating the notion that the responsibility for health and education is with the donors.

This led to woeful under-investment in these critical sectors. We need to find ways to change incentives. There is a global crisis of childhood stunting, which means that a child under five is two standard deviations below height for age. Brain scans from a study by Professor Charles Nelson from Harvard Medical School demonstrate the impact of childhood stunting on the development of neuronal tracts.

Stunted children develop fewer neuronal connections during their first 1, days of life, a time period that is critical to building their human capital.

The percent of children who are stunted is staggering: 45 percent in Pakistan; 38 percent in India; 36 percent in Indonesia. This is a medical emergency. Attacking childhood stunting is critical for economic growth. We analyzed longitudinal data from Indonesia and found that children who were stunted in demonstrated lower cognitive function in and Lower adult stature and cognitive ability was associated with lower adult earnings — in , a person who was stunted in earned 12 percent lower monthly wages than those who were not stunted.

We also know that education systems are falling behind. Half of primary school children in developing countries are still failing to achieve minimum proficiency in reading, writing, and basic math; million children are not in school.

In a survey across seven countries in Sub-Saharan Africa, which represent about 40 percent of the continent's population, one-third of teachers had not mastered the fourth-grade language curriculum that they were teaching. And in Mozambique, Nigeria, and Togo, half of the teachers hadn't mastered the curriculum they were there to teach. This also matters for economic growth. On average, one additional year of schooling yields a 9 percent increase in lifetime earnings, and the returns are even larger for girls.

What can we do to help countries invest more — and more effectively — in their people? We decided to do something called the Human Capital Index, which ranks countries in terms of the quality of their investment in human capital. When the World Bank publishes rankings, they are always controversial. But we want every single country to begin debating the quality of their investments in people. And, looking backwards, we found that investments in people — to improve outcomes in health and education — were far more correlated with economic growth than we ever thought.

Finally, underlying these pathways is the need for both private and public innovators to design technology that helps create equality of opportunity for everyone, especially the poorest. It starts with technology that creates jobs: Bangladesh contributes 15 percent to the global labor pool online by means of its , freelance workers. Taobao Villages, which connect self-employed shop owners to the Chinese online marketplace, have created more than 1.

This will help governments identify skills that are in demand, expand industries and develop training programs to support them. Digital platforms can be designed to disrupt the gender divide and help make the global market system work for everyone. Tourism comprises one of the largest job-rich service industries in the world.

We still need a better understanding of how sharing economy business models can reduce inequality. We need to build technology where the poorest and the most vulnerable are part of its core architecture—where human solidarity is stamped into the DNA of every new innovation.

In , New York University cultural critic Neil Postman gave a talk about technology at the dawn of the new millennium. He said:. The question that I want to ask those of you working in technology is, what's the philosophy of your technology? The philosophy of your technology may be the most important thing you will design, and you need to ask some hard questions:. Before you track your runway and burn rate, before you go down Sand Hill Road and look for your Series A funding, you have to think about, "Who is it for?

Who is it going to benefit? Before you apply for a patent or present your idea in a paper — think about the philosophy of your technology and how your idea can do more good — and also, do far less harm. It comes through the tireless efforts and the persistent work of dedicated individuals.

And without this hard work, time itself becomes an ally of the primitive forces of social stagnation. And so, we must help time, and we must realize that the time is always right to do right. It will take all of us in the arena, fighting with a fierce sense of urgency for the Poma family in Bolivia;. At least in part because of the great technology that was built right here in Silicon Valley, their aspirations are rising.

And just like everyone on earth, they deserve security, dignity, and the opportunity to succeed. This is very personal for me. I was born in in Korea, when it was one of the poorest countries in the world. This is what the World Bank said about Korea in "Korea will find it difficult without foreign aid to provide its people with more than the bare necessities of life.

But, of course, Korea defied all of those predictions, and the World Bank got it wrong. You have to be optimistic about every country, and optimism, in this case, is a moral choice. Optimism is at the core of my story. As consumers become employed or experience wage increases, they tend to increase their purchases of clothes, cars, technology, homes, and home goods such as appliances.

All of that spending creates a positive ripple effect leading to improved employment in various industries such as retail, auto manufacturers, technology stores, and home builders, to name a few. The spending also leads to higher GDP growth throughout the economy. The increased GDP growth from consumer spending leads to improvements in business conditions. As companies become more profitable, they tend to invest more money into their businesses to create future growth.

Business investment can include new equipment and technology purchases. The investments businesses make are called capital investments. Capital investments, which require large outlays of capital or cash, are designed to boost a company's productivity and profits in the long term. In a growing economy, companies also take on additional borrowing from banks to expand production due to higher consumer demand.

The loan proceeds are usually used for large purchases of assets such as manufacturing plants and equipment. The added production also leads to higher wages and increased employment as more workers are needed for the increase in consumer demand for a company's products.

As companies look to hire workers to help with the increase in sales, it leads to new job openings in various types of employment. However, if the labor market becomes too tight, due to an expanding economy, companies are forced to train workers for the skillsets needed since there aren't enough available skilled workers.

As a result of business investment, companies are more productive, while GDP growth rises since business investment is a key component of growth. Both consumer spending and business investment not only lead to more economic growth but also play a prominent role in determining the level of training and development of workers.

Human capital is positively correlated to economic growth since investment tends to boost productivity. The process of educating a workforce is a type of investment, but instead of capital investment such as equipment, the investment is in human capital.

The role of governments is key to expanding the skillsets and education levels of a country's population. Some governments are actively involved in improving human capital by offering higher education to people at no cost. These governments realize that the knowledge people gain through education helps develop an economy and boost economic growth. Workers with more education or better skills tend to have higher earnings, which, in turn, increases economic growth through additional consumer spending.

Companies also invest in human capital to boost profits and productivity. For example, let's say an employee working at a technology company receives training to be a computer programmer through on-site training and in-house seminars. The company pays for a portion of the tuition for higher education. J Int Bus Stud 40 7 — J Polit Econ 2 — J Comp Econ 32 3 — Spielman DJ, Ma X Private sector incentives and the diffusion of agricultural technology: evidence from developing countries.

J Dev Stud 52 5 — Chin Econ 44 2 — J Econ Growth 11 2 — Download references. We would like to thank Vincent Hoang, Janice How, Sandy Suardi, Shrabani Saha, Peter Siminski and participants at various seminars and conferences for thoughtful discussions and comments. We take responsibility for any errors. Queensland University of Technology, Brisbane, Australia. You can also search for this author in PubMed Google Scholar. Correspondence to Radhika Lahiri. This article does not contain any studies with human participants or animals performed by any of the authors.

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Reprints and Permissions. Asif, Z. Dimensions of human capital and technological diffusion. Empir Econ 60, — Download citation. Received : 22 April Accepted : 23 September Published : 11 October Issue Date : February Anyone you share the following link with will be able to read this content:. Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative. Skip to main content. Search SpringerLink Search. Abstract We examine the impact of a comprehensive set of measures of human capital on recently created, direct measures of technology adoption using country-level panel data for the period —, covering a wide range of technologies in various sectors of the economy. Notes 1. We thank two anonymous referees for these suggestions.

Econom Rev 19 3 — Google Scholar Branstetter L Is foreign direct investment a channel of knowledge spillovers? J Econ Growth 17 4 — Google Scholar Herzer D The long-run relationship between outward foreign direct investment and total factor productivity: evidence for developing countries.

Health, health policy and economic outcomes, 61—80 Jovanovic B, Nyarko Y Learning by doing and the choice of technology. Acknowledgements We would like to thank Vincent Hoang, Janice How, Sandy Suardi, Shrabani Saha, Peter Siminski and participants at various seminars and conferences for thoughtful discussions and comments.

Funding This study is not funded by any grant. View author publications. Ethics declarations Conflict of interest The authors declare that they have no conflict of interest. Ethical approval This article does not contain any studies with human participants or animals performed by any of the authors. Search inside this book for more research materials.

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