The World Bank's new Human Capital Index: mind the gap between quantity and quality in Peruvian education

20 October 2018

A new study by the World Bank develops the concept of the 'potential' of human capital, country by country.

The idea is that for any country, it is possible (with a considerable leap of faith) to measure where it lies in a ranking towards the abstract goal of 'perfect' human capital. This would mean what those born today can expect by age 18, with '100%' representing all surviving and as healthy and well-educated and well-equipped for the labour force as they could possibly be. Peru achieves 59% on this yardstick, equal to Colombia. The highest scorer in Latin America is Chile with 67%.

The most interesting component of the indicator (and the most treacherous) is the quality adjustment. Predicted enrolments give us the quantity of education by age 18, but quality, we know very well, is another matter, and the World Bank has developed an adjustment for quality leading to the idea of a ‘quality gap’. So, Peru's children born today can expect on average 12.7 years of education by the time they reach 18; but adjusting for quality, this comes down to 8.3, giving a 4.4 year quality gap. This is implicitly a policy signal.

So how is that quality adjustment calculated? We find it is based on a recent piece of work of the Bank bringing together international evaluations of performance, such as PISA.

There is a vast literature criticising such international evaluations, and their ability to measure quality is a major focus of attack. We should treat with caution the fact that Peru and Paraguay dead-heat to show by a whisker the largest gap in Latin America except for El Salvador. Also, we should note that Bolivia and Venezuela are not in the assessment for lack of data.

The challenge Peru faces in quality of education is well-known from specific country studies: schooling in indigenous and rural areas may have made strides in quantity but quality is the real challenge. Rather than worrying about international comparisons, an endogenously-grown measure of the 'quality gap' would provide a useful policy lever.

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