In 2007 the World Bank approved a 150 million primary educat

In 2007, the World Bank approved a $150 million primary education project in the Democratic Republic of the Congo (Project ID: P086294). One of the goals of the project is to increase primary school completion of girls as this has a host of benefits, including lower fertility rates. Assuming the only impact of this program is to reduce the workforce growth rate (by slowing the population growth rate), illustrate its short and long run impacts using a Solow Growth Model. Also consider the project\'s effects on education, labor force participation, and labor productivity.

Solution

Assuming that the only impact of the primary education fund is a lower work force growth rate due to lower population growth rate , Solow model in such a scenario predicts that the steady state of the economy where further capital accumulation does not take place would reach earlier since at steady state the following condition is satisfied:

sf(k) = (n + d)k (where d is the rate of depreciation)

Thus under such a scenario economy reaches its steady state at an earlier stage as given s and d are constant, a lower value of n implies a lower level of overall equilibrium output of the economy.Also at steady state the per capita output remains constant or in other words total output increases at the rate of growth of population.Hence in case of a lower population growth rate the total output growth rate would also be lower under the steady state condition.

However in the steady state total output grows at the rate of population growth , thus a lower population growth rate implies a lower growth rate of total output .However output per capita grows only at the rate of growth of technology in the long run .Thus over the long run if productivity of the labor increases drastically then output per capita would grow at a larger rate i.e growth in productivity.

The education fund leads to an improvement in situation of population growth rate of the country.This reduced population growth rate is a result of the improved education scenario especially among girls.Thus the fund \'s impact of a reduced population growth rate is itself a proof of the improved education scenario especially among girls.

As a result of improved education clearly prospects of labor force increase hence there would be a larger labor force participation in the industry.

Due to an improvement in the education level clearly the productivity of the labor increases in the long run which would be responsible for long run growth of per capita income.