Human Capital Roots of
the Middle Income Trap:
Education, Nutrition and Health
Inequality in China
Scott Rozelle
Stanford University (Senior Fellow)
Director, Rural Education Action Project (REAP)
&
Collaborators in China, the US and Elsewhere
Two goals
1. Tell a story (and show some numbers):
– about Growth/Development and Inequality (as a
way to motivating why it is that inequality is important)
… this is a story (not evidence) … it may or may not
be true … but, I think the question is “is it possible” …
and if it is, is there any thing we can do about it …
and is it worth the investment (even as an insurance
policy) …
2. Try to show you the extent of human capital
inequality in China today
– … and why if it is not addressed, tomorrow’s income
inequality is likely to be very high … and how, if
nothing is done about it, how such high human capital
inequality today may be what undermines /
endangers China’s future growth.
We all know why such a large share of the things the world makes are
manufactured in China today! It is because China’s wage rates were so
28
low in the 1980s and 1990s … 27.52
24.91
20
23.65
美元/小时
24
21.76
16
13.56
12
8
4.09
4
2.63
0.50
0.7
0.52
0
中国
China
美国
US
日本
Japan 欧盟15国
EU
韩国
Korea
Hourly Wage, 1990s
澳大利亚
Australia 墨西哥
Mexico 巴西
Brazil 斯里兰卡
Sri Lan.
But, it was not always like this … in the 1970s and 1980s, most things were
made in South Korea (and Taiwan, Hong Kong, Singapore … and Mexico)
28
27.52
20
23.65
美元/小时
24
24.91
21.76
Korea
16
1970s /Early
13.56
1980s
12
8
4.09
4
2.63
0.50
0.75
0.7
0.52
0
中国
China
美国
US
日本
Japan 欧盟15国
EU
韩国
Korea
Hourly Wage, 1990s
澳大利亚
Australia 墨西哥
Mexico 巴西
Brazil 斯里兰卡
Sri Lan.
But through the 1980s and 1990s, South Korea’s wages rose rapidly …
28
27.52
20
23.65
美元/小时
24
24.91
21.76
Korea
16
1970s /Early
12
1980s
Korea
13.56
13.56
Today
8
4.09
4
2.63
0.75
0.50
0.75
0.7
0.52
0
中国
China
美国
US
日本
Japan 欧盟15国
EU
韩国
Korea
Hourly Wage, 2005
澳大利亚
Australia 墨西哥
Mexico 巴西
Brazil 斯里兰卡
Sri Lan.
And a transformation took place
in its economy (and work force):
From a low-wage, labor-intensive
economy …
… to a high-productivity, servicebase, innovative-based economy
The 1970s/Early 1980s
Late 1990s to Today
How did South Korea make this transformation?
South Korea in the 1970s/1980s
100
Percent of 100
students
that go to 8080
High
6060
School
Today
1980s
4040
2020
00
Largecities
cities Rural
Poor Korea
rural
Large
China
areas
ininKorea
• In no small part it was
due to the fact that it
labor force was highly
educated …
• Even in the early
1980s, almost
everyone (urban and
rural) in South Korea
graduated from high
school
But, not all countries made this
transformation (from middle
income to rich) as smoothly in the
1980s and 1990s as South Korea
That is not to say that there were not other candidates for “developing”
successes in the 1970s/80s/early 90s … One was our neighbor, Mexico …
28
although
wages in the 1970s were low … manufacturing was growing …
27.52
20
23.65
美元/小时
24
24.91
21.76
Mexico
16
Early
13.56
1970s
12
8
4.09
4.00
2.63
4
0.50
0.75
0.7
0.52
0
中国
China
美国
US
日本
Japan欧盟15国
EU
韩国
Korea
澳大利亚
Australia墨西哥
Mexico 巴西
Brazil 斯里兰卡
Sri Lan.
Hourly Wage, 1990s
And just as in Korea, wages in Mexico began rising in the late 1980s and
early 1990s … Mexico looked like it was on the path to becoming a
developed
country …
28
27.52
20
23.65
美元/小时
24
24.91
21.76
16
Mexico
Mexico
Early
13.56
Mid-1990s
1970s
12
8
4.00
4
4.09
2.63
0.50
0.75
0.7
0.52
0
中国
China
美国
US
日本
Japan欧盟15国
EU
韩国
Korea
澳大利亚
Australia墨西哥
Mexico 巴西
Brazil 斯里兰卡
Sri Lan.
Hourly Wage, 1990s
As would be expected, low-wage
factories in Mexico shut down and
moved elsewhere in the world
The hope was that employers would invest in
higher productivity jobs that would be able to
support the rising wage rates (this is what
development is all about, after all …)
BUT, Mexico’s education system did not succeed in educating
large share of the labor force for the new economy …
South Korea in the 1970s/1980s
100
Percent of 100
students
that go to 8080
High
6060
School
1980s
Today
Mexico in the 1980s!
100
1980s
80
60
4040
40
2020
20
00
0
Large
Largecities
cities Rural
Poor Korea
rural
ininKorea
China
areas
Large cities Rural / Urban
in Mexico
Poor
Mexico in Crisis
Travel Warning
U.S. DEPARTMENT OF STATE
Bureau of Consular Affairs, Mexico
Foreign Direct Investment
in Mexico
30
Cartels & gangs
25
20
Violence
Unemployment
20
05
20
06
20
07
20
08
20
09
20
10
15
This motivates a more fundamental question:
Is it inevitable that Developing Countries that
are growing fast and achieve Middle Income
status always will continue to grow and
become rich, industrialized nations?
• In fact, history is littered with a lot of
wannabe OECD members:
– Argentina … one of the four richest countries
in the world in the early 20th century …
collapse and stagnation after WWII
– Uruguay / Iraq / Venezuela (in the 1960s &
70s)
– MORE RECENTLY:
• How about .Mexico / Egypt / Tunisia / etc
List of Countries/Regions that Have Moved from
Middle Income to High Income After WWII
[“Graduates”]
East Asian Mediterra- Eastern
Countries / nean
Europe
Regions
S. Korea
Portugal
Croatia
Others (oil
countries*)
Taiwan
Trin & Tob*
E. Guinea*
Spain
Slovenia
Greece
Slovak Rep.
Israel
Hungary
Ireland
Czech
New Zea.
Estonia
List of Countries/Regions that Have
Moved from Middle Income to High
Income After WWII and the GINI Ratios
(“Graduates”)
East Asian Mediterra- Eastern
Countries / nean
Europe
Regions
Others
S. Korea (32)
Portugal (38) Croatia (34)
Ireland (34)
Taiwan (32)
Spain (35)
Slovenia (31)
New Zea. (36)
Greece (34)
Slovakia (26)
Israel (39)
Hungary (31)
Czech (26)
Estonia (36)
List of Countries/Regions that Have
Moved from Middle Income to High
Income After WWII and the GINI Ratios
(“Graduates”)
East Asian Mediterra- Eastern
Countries / nean
Europe
Regions
Others (oil
countries*)
S. Korea (32)
Portugal (38) Croatia (34)
Ireland (34)
Taiwan (32)
Spain (35)
Slovenia (31)
New Zea. (36)
Greece (34)
Slovakia (26)
Israel (39)
Hungary (31)
Czech (26)
Growth With Equity
Estonia (36)
Aspiring Middle Income
Countries
(“Aspirees”)
•
•
•
•
•
•
•
•
•
•
•
•
Argentina
Brazil
Chile
Costa Rica
Malaysia
Mexico
Russia
Thailand
Tunisia
Turkey
Uruguay
Venezuela
+ China
Aspirees Inequality (gini ratios)
•
•
•
•
•
•
•
•
•
•
•
•
Argentina
Brazil
Chile
Costa Rica
Malaysia
Mexico
Russia
Thailand
Tunisia
Turkey
Uruguay
Venezuela
(46)
(54)
(52)
(50)
(46)
(52)
(42)
(42)
(41)
(43)
(42)
(44)
Aspirees Inequality (gini ratios)
•
•
•
•
•
•
•
•
•
•
•
•
Argentina
Brazil
Chile
Costa Rica
Malaysia
Mexico
Russia
Thailand
Tunisia
Turkey
Uruguay
Venezuela
(46)
(54)
(52)
(50)
(46)
(52)
(42)
(42)
(41)
(43)
(42)
(44)
Average Aspirees: 47
Aspirees Inequality (gini ratios)
•
•
•
•
•
•
•
•
•
•
•
•
Argentina
Brazil
Chile
Costa Rica
Malaysia
Mexico
Russia
Thailand
Tunisia
Turkey
Uruguay
Venezuela
(46)
(54)
(52)
(50)
(46)
(52)
(42)
(42)
(41)
(43)
(42)
(44)
China:
≈50 and rising!
The stories of Korea and Mexico provide the backdrop for interpreting what is
happening in China today and where China is heading
28
20
美元/小时
While low wages and labor-intensive
manufacturing
fueled economic growth in
27.52
24.91
23.65 and 1990s … China today (like Korea and Mexico earlier) is
China
in the 1980s
24
entering a new era … 21.76
16
13.56
12
8
4.09
4
2.63
0.50
0.75
0.7
0.52
0
中国
China
美国
US
日本
Japan 欧盟15国
EU
韩国
Korea
Hourly Wage, 1990s
澳大利亚
Australia 墨西哥
Mexico 巴西
Brazil 斯里兰卡
Sri Lan.
Annual Real Hourly
Wage (1978 dollars)
≈ $2.00
/ hour
in 2011
4000
2000
Unskilled wage
≈ 30 ¢ / hour
in 1978
0
1978 1983 1988 1993 1998 2003
2010
Year
Park and Cai, 2008
Implications
• China continues to grow: RISING
DEMAND
• Size of labor force falls:
SUPPLY
FALLING
By 2025 to
2030

$6
to
Rising wages in the future
$8 to $10/hour
Changing industrial structure
How Expensive are Chinese Workers?
Manufacturing Wages 1994-2008 (USD/year) China
4500
China
India
Indonesia
Philippines
4231
Thailand
4000
3500
3000
3481
Philippines
2849
2338
2500
2000
2018
Thailand
2833
1638
1500
1180
1075
497
481
Indonesia
367
433
China
1000
500
0
1994
1996
1998
2000
India
2002
2004
2006
2008
Source:
International
Organizationthis
LABORSTA
Database
Of course, as we will see
later
in the Labor
presentation,
also has
implications for farming
But, with higher wages, can
China move itself up the
productivity ladder
“Textile worker” in high wage
countries
“made to order” Gucci shoe factory
To do his job, he needs to be
competent in math, language, English
and computers …
Will these young women … who are working
in China’s textile plants now … be able to do
the job in a modern high fashion textile
plant?
Unfortunately, most
barely know how to
read and write …
This is my auto mechanic … in Palo Alto …
Question: “Will these boys be able to do the jobs
that need to be done in the future economy?”
None of these students have ever touched a computer or surfed the web
So: China’s real challenge is coming …
and there are fundamental questions:
– Can China transform itself like:
• South Korea / Spain / New Zealand
– Or  will China become a:
• Mexico / Argentina
A Middle Income Trap?
What is the problem of trying to
move from middle to high income
with such high levels of inequality?
A lot of it has to do with the slowing growth that
occurs during this phase of development …
… and the stability of a country
[can all individuals share in the prosperity (when
growth stops? … and if they can’t will they take
actions that will slow growth further?]
Key question: What will China’s
inequality be like in the coming
years (when growth slows)?
• Sure it is high now … but, will it be high when
China’s growth inevitably slows?
• To examine this question rely, in part, on part
of this equation:
Today’s human capital inequality among children
(health / nutrition / education) is one of the
strongest determinants of tomorrow income
inequality
China’s Inequality in 2025 to 2030
[must look at one of the “iron laws of inequality]
Income Inequality TODAY
+
Human Capital Inequality TODAY
=
Income Inequality TOMORROW
China’s Inequality in 2025 to 2030
[must look at one of the “iron laws of inequality]
Income Inequality TODAY  VERY HIGH
+
Human Capital Inequality TODAY
=
Income Inequality TOMORROW
China’s Inequality in 2025 to 2030
[must look at one of the “iron laws of inequality]
Income Inequality TODAY  VERY HIGH
+
Human Capital Inequality TODAY ?
=
Income Inequality TOMORROW
Education equality?
Health equality?
Nutrition equality?
China’s Inequality in 2025 to 2030
[must look at one of the “iron laws of inequality]
Income Inequality TODAY  VERY HIGH
+
Education equality?
Human Capital Inequality TODAY ?Health equality?
Nutrition equality?
=
Income Inequality TOMORROW
What will China’s inequality be like
in 2025 or so?
• Sure it is high now … but, will it be high when China’s
growth slows?
• To examine this question rely, in part, on part of this
equation:
In short: Today’s human capital inequality among children
(health / nutrition / education) is one of the strongest
determinants of tomorrow income inequality  are
workers today employable tomorrow?   and a strong
determinant of tomorrow’s stability
Rest of presentation
Examine Today’s China Human Capital Inequality?
– How equal are China’s education skills?
– How poor is nutrition in China’s poor rural areas?
– How are China’s health outcomes distributed between
eastern and western China?
So: What is the nature of China’s human
capital today? … in poor rural areas ?
• ≈ 45 (nearly half) of
school-aged children in
poor rural areas
(≈ 80 million children,
ages 6 to 15 …
cities
other
rural
> 100 million if include infants and
toddlers)
Remember: today’s children are tomorrow workers and professionals …
How unequal is China’s education
system today?
infants
elementary
school
junior high
school
vocational
high school
academic
high school
college
How unequal is China’s education
system today?
infants
elementary
school
junior high
school
vocational
high school
academic
high school
college
Probability of a child from a poor
rural area going to college (relative
to child from the city)
Times (x)
25
Urban
20
21x
8 out of 100 (rural)
15
Urban
10
13x
Urban
versus
5
Poor
Rural
8x
0
Any college
Poor
Rural
Poor
Rural
70 out of 100 (urban)
Four Year College
Using data for 6 million Gaokao takers (2003)
Elite College
Probability of a child from a poor
rural area going to college (relative
to child from the city)
Times (x)
60
Urban
50
53x
5 out of 100
40
Urban
Poor rural
youth
30
20
10
Urban
Poor
Rural
15x
0
Any college
32x
versus
75 out of 100
Poor
Rural
Four Year College
Using data for 6 million Gaokao takers (2003)
Poor
Rural
Urban
youth
Elite College
Probability of a child from a poor
rural area going to college (relative
to child from the city)
Times (x)
25
Urban
20
21x
15
Urban
10
13x
Urban
5
Poor
Rural
8x
0
Any college
Poor
Rural
Four Year College
Poor
Rural
Elite College
Even worse odds for four year colleges … and elite
colleges …
Probability of a child from a poor
rural area going to college (relative
to child from the city)
Times (x)
25
Urban
20
15
10
5
0
Do you know how
Urban
many poor, rural,
13x
female minorities
Urban
are in PKU and
Poor
Poor
Poor
8x
Rural
Rural
Tsinghua?
Rural
Any college
Four Year College
21x
Elite College
Probability of a child from a poor
rural area going to college (relative
to child from the city)
Times (x)
25
Urban
20
21x
15
Urban
Only 7
10
13x
Urban
5
Poor
Rural
8x
0
Any college
Poor
Rural
Four Year College
Poor
Rural
Elite College
Do you know how many poor, rural, female minorities are in PKU and Tsinghua?
How unequal is China’s education
system today?
infants
elementary
school
junior high
school
vocational
high school
academic
high school
college
While all kids do not need to go to college, all
children should be going to high school …
to get skills for workforce 20 years from now!!
… as we have seen from the discussion
above, this is critical at this stage of
development to get all children the skills
they will need in the future
• Only 40% of junior high grads in poor rural
areas go on to academic high school ..
While all kids do not need to go to college, all
children should be going to high school …
to get skills for workforce 20 years from now!!
… as we have seen from the discussion
above, this is critical at this stage of
development to get all children the skills
they will need in the future
• BUT: Only 40% of junior high grads in poor
rural areas go on to academic high
school ..
High School Gap in China today
China in the 2005
100
Percent of
students
80
that go to
High
60
School
40
20
0
Large cities
in China
Poor rural
areas
Mexico in the 1980s!
Who Does China Look Like? South Korea/Taiwan or Mexico?
South Korea/Taiwan in 1970s/1980s
100
Percent of 100
students
that go to 8080
High
6060
School
1980s
Today
Mexico in the 1980s!
100
1980s
80
60
4040
40
2020
20
00
0
Large
Largecities
cities Rural
Poor Korea
rural
ininKorea
China
areas
Large cities Rural / Urban
in Mexico
Poor
High School Gap in China today
China in the 2005
100
Percent of
students
80
that go to
High
60
School
Mexico Difference
in the 1980s!
between Mexico
and China?
This gap
represents more
than 100 million
children / youth /
young adults …
40
20
0
Large cities
in China
Poor rural
areas
If Chinese
children do not get
educated today …
what are their
options tomorrow?
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$ USD
各国高中每年的学费(美圆)
Why is
high school attendance so low?
180
160
160
100
High School Tuition Levels around the world
140
120
(in US dollars – public rural high schools)
China
80
60
50
40
25
0
0
0
0
0
0
0
0
0
0
0
0
0
25
20
10
0
0
0
0
0
13 13
0
0
0
0
0
0
Minister of Education (March 2013)
• We will NOT eliminate tuition in Academic
High School!
• We will NOT increase enrollment in
Academic High School!
So what do they say?
• Keep with the PLAN: expansion of
education is through Vocational Education
and Training (VET)
Is this a good idea?
Minister of Education
• We will NOT eliminate tuition in Academic
High School!
• We will NOT increase enrollment in
Academic High School!
So what do they say?
• Keep with the PLAN: expansion of
education is through Vocational Education
and Training (VET)
Is this a good idea?
How unequal is China’s education
system today?
infants
elementary
school
junior high
school
vocational
high school
academic
high school
college
REAP study on VET in Zhejiang and Shaanxi
• Vocational Education and Training (VET):
– Rich areas (75 VET programs in Zhejiang):
• Students are learning vocational skills
• Basic academic skills of students are NOT deteriorating
– Poor areas (65 VET programs in Shaanxi)
• Students are not learning any vocational skills
• Math and Chinese skills are deteriorating
[Students are NOT learning anything in VET programs]
[Students in academic high school (AHS) are learning
New study on VET in Zhejiang and Shaanxi
• Vocational Education and Training (VET):
– Rich areas (75 VET programs in Zhejiang):
• Students are learning vocational skills
• Basic academic skills of students are NOT deteriorating
– Poor areas (65 VET programs in Shaanxi)
• Students are not learning any vocational skills
• Math and Chinese skills are deteriorating
[Students are NOT learning anything in VET programs]
[Students in academic high school (AHS) are learning]
New study on VET in Zhejiang and Shaanxi
• Vocational Education and Training (VET):
– Rich areas (75 VET programs in Zhejiang):
• Students are learning vocational skills
• Basic academic skills of students are NOT deteriorating
– Poor areas (65 VET programs in Shaanxi)
• Students are not learning any vocational skills
• Math and Chinese skills are deteriorating
[In other words: Students are NOT learning anything in VET
programs in Poor Areas]
So what are the consequences of such poor quality VET?
drop outs
in VET
after 1 year
after 3 years
61%
[sample of 140
VET schools
in ZJ and SX]
49%
Drop out rate
22%
6%
Rich Students
Poorest students
Average
Poorest
drop outs
in VET
after 1 year
after 3 years
61%
[sample of 140
VET schools
in ZJ and SX]
Drop out rate
22%
25%
6%
Rich area students Poorer
Rich area
Poorer students
In fact, REAP is showing the the
problems are starting before upper
secondary school
****
Let’s examine the nature of Junior High education:
quality of education
nature of Junior High drop outs
How unequal is China’s education
system today?
infants
elementary
school
junior high
school
vocational
high school
academic
high school
college
Junior High School
Student achievement gains
(in 175 poor rural jr. high schools)
using IRT-scaled achievement tests
Mean Math Achievement Gains
By Students' Expected Plans at the Start of Grade 7
-.05
0
.05
.04
-.15
-.1
-.03
-.09
-.12
labor market
voc. HS
acad. HS
undecided
(IRT-scaled z-scores)
Lots of students had negative or zero gains in achievement!
Unsurprising: REAP study shows (in part due to
poor quality of education / and rising wages) China’s
rural students are not even getting through junior
high school
Drop out rate
14%
29%
38%
9%
+?
15%
+
14%
Grade 7
14%
Grade 8
15%
+
14%
Grade 9
Nearly 40
percent of
students from
poor rural areas
are dropping out
of JUNIOR
HIGH
SCHOOL!
What are kids who are dropping out
of Junior High today (they are 13
years old) going to do in 2030
(when they are 30 years old)?
• They barely know how to read
• They barely know how to write
• They are angry at the school system for
ignoring them … and this translates into
anger at the government & society!
Is this the breeding grounds of China’s
future instability?
How unequal is China’s education
system today?
infants
elementary
school
junior high
school
vocational
high school
academic
high school
college
Maybe the “REAL source” of
problem begins before junior high
school
• Why?
– Poor quality of education in grades 1-9
and before
• Poor facilities … teachers … curriculum …
• Poor nutrition …
For example:
There are many ways … many
potential technology-based
solutions …
In fact, in the 12th Five-year plan, the
government is committed to supply every rural
school with a computer room …
But, if the government just drops computers
into rural schools is not enough…
Even Worse…
Need to figure out
sustainable,
implemenatable,
effective solutions
Maybe the “REAL source” of
problem begins before junior high
school
• Why?
– Poor quality of education in grades 1-9
and before
• Poor facilities … teachers … curriculum …
• Poor nutrition / health!!
No matter how much investment into facilities / teacher salaries & training /
curriculum … if students are sick or malnourished, may not be able to learn …
Is this a problem?
Maybe the “REAL source” of
problem begins before junior high
school
• Why?
– Poor quality of education in grades 1-9
and before
• Poor facilities … teachers … curriculum …
• Poor nutrition / health!!
No matter how much investment into facilities / teacher salaries & training /
curriculum … if students are sick or malnourished, may not be able to learn …
Is this a problem?
Between 2008 and 2012 we
tested nearly 60,000 children
across China for iron-deficiency
anemia
In fact, anemia is all over China
Total
Total
Shaanxi—2008 (Dataset 1)
Shanxi—2009a (Dataset 2)
Gansu—2010 (Dataset 3)
Qinghai—2009 (Dataset 4)
Ningxia—2009 (Dataset 5)
Sichuan—2010 (Dataset 6)
Guizhou—2010 (Dataset 7)
33.7
37.5
31.6
31.2
51.1
25.4
24.8
33.1
Luo, R., X. Wang, C. Liu, et al. (2011) “Alarmingly High Anemia
Prevalence in Western China.” Southeast Asian Journal of Tropical
Medicine and Public Health Vol. 42 No. 5
Poor areas of China
Children
with anemia
(≈ 33%)
≈ 30 to 35 million school aged
children are estimated to be
suffering from malnutrition!
Children with
out
Non-poor areas
of China
Children
with anemia
(≈ 8%)
< 5 million school aged children
in all of the rest of China
Children with
out (92%)
Testing 19,500 children in Gansu and
Shaanxi Provinces
myopic
normal
vision
 5000 (≈25%) were myopic (or nearsighted).
Testing 19,500 children in Gansu and
Shaanxi Provinces
myopic
normal
vision
 5000 (≈25%) were myopic (or nearsighted).
Only 650 had eyeglasses (≈ 3%) … only 1 of 8 that needed glasses have them …
WeSCOURGE
have tested nearly
5000 children for:
THE
WITHIN:
INTESTINAL WORMS IN RURAL CHINA
Chinese Academy of Sciences
Center for Disease Control, Shanghai
Stanford University (with support of Asia Health Care
Initiative funding)
Stanford alum volunteer, Susan
Chen (class of 2009)
Incidences of Intestinal Worms,
Guizhou Province, 2010
41.7%
with
worms
33.9%
with
worms
Without
3 to 5 year olds
Without
8 to 10 year olds
Zhang et al., 2011
… millions of
children are
infested with
these …
How unequal is China’s education
system today?
infants &
toddlers
elementary
school
junior high
school
vocational
high school
academic
high school
college
Even earlier
(malnutrition
during the
first 1000
days)
• Testing ≈1000
babies and their
Mom’s in
Southern
Shaanxi
(these areas are 2 to 3 hour
drive from Xi’an – one of
China’s fastest growing
cities)
Even earlier (malnutrition during
the first 1000 days)
• Of the 948 babies tested (as of last week)
 556 of them are malnourished
[or ≈ 60 percent of infants are seriously sick]
Severe malnutrition problems in
babies in China’s rural communities
• Of the 949 babies tested (as of last night)
 556 of them are malnourished
[or ≈ 60 percent of infants are seriously sick]

< 20% are stunted / wasted
What are the Cognitive
Consequences of Malnutrition
All babies are
being given an
Infant IQ test
(Bayles test)
High school volunteer from Harker School (San Jose)
… Wendy will be in Stanford’s new incoming class …
Cognitive Consequence of
Malnutrition
• Around 70 percent of infants FAILED their
baby infant IQ tests
– Sub-normal cognition
– Sub-normal motor skills
Ultimate Consequences:
If the micronutrient deficiencies of
infants / toddlers are not corrected
before baby is 30 months old 
• Life time effects on:
– IQ
– Mental health
– Height
– Weight
– Health
What does this mean?
In harshest terms:
Between 20 to 30 percent of China’s
future population are in danger of
becoming PERMANENTLY physically
and mentally HANDICAPPED
By the way: we also executed several non-cognitive scales for infants …
results available soon ..
Final Summary / Conclusions
What are the prospects for China’s
inequality in the coming years?
Income Inequality TODAY
+
Human Capital Inequality TODAY
=
Income Inequality TOMORROW
What are the prospects for China’s
inequality in the coming years?
Income Inequality TODAY (highest in the world)
+
Human Capital Inequality TODAY
=
Income Inequality TOMORROW
What are the prospects for China’s
inequality in the coming years?
Income Inequality TODAY (highest in the world)
+
Human Capital Inequality TODAY (very high)
=
Income Inequality TOMORROW
Unequal Education
Unequal Nutrition
Unequal Health
What are the prospects for China’s
inequality in the coming years?
Income Inequality TODAY (highest in the world)
+
Human Capital Inequality TODAY
Education equality?
Health equality?
Nutrition equality?
=
Income Inequality TOMORROW 
 EXTREME?
Summary of China’s development
experience …
• In past 30 years  success with growth
BUT: at cost of GREAT inequality
– High income inequality today
– High human capital inequality today
• Fact: growth will slow
– Ageing / lower rate of effective investment
– Max rate of growth after 2030 is 2 to 3 to 4 %
Many reasons to be concerned it will go to ZERO
Unlike the patterns of growth in countries
that successfully graduated from middle
income to high income
• Japan, South Korea, Taiwan, Ireland, New
Zealand, Israel, Czech Republic, Slovikia
… and more: GROWTH WITH EQUITY
• Argentina, Venezuela, Mexico, Brazil and
Chile (in 1960s/1970s): GROWTH WITH
HIGH INEQUALITY 
COLLAPSE / STAGNATION
Unlike the patterns of growth in countries
that successfully graduated from middle
income to high income
China is NOT on the path of 
• Japan, South Korea, Taiwan, Ireland, New
Zealand, Israel, Czech Republic, Slovikia
… and more: GROWTH WITH EQUITY
• Argentina, Venezuela, Mexico, Brazil and
Chile (in 1960s/1970s): GROWTH WITH
HIGH INEQUALITY 
COLLAPSE / STAGNATION
Unlike the patterns of growth in countries
that successfully graduated from middle
income to high income
• Japan, South Korea, Taiwan, Ireland, New
Zealand, Israel, Czech Republic, Slovikia
… and more: GROWTH WITH EQUITY
In many ways, China is following the paths of 
• Argentina (in the 1950s); Venezuela, Brazil
and Chile (in 1960s/1970s); Mexico
(Today):
GROWTH WITH HIGH INEQUALITY 
COLLAPSE / STAGNATION
Can China address this issue?
• Can not do much about growth?
[Growth will slow … of course, need to keep growth
as high as possible for as long as possible …
raises issues of sustainable growth … save for
another time]
• Can not do anything about Today’s Income
Inequality (it is a FACT)
• One of main interventions  Investment
Heavily TODAY in human capital … for ALL
Declare WAR on RURAL EDUCATION,
NUTRITION and HEALTH
• Better classrooms / Better teachers / Better curriculum
•
•
•
•
•
•
•
•
•
Vitamin / day  0.2 yuan per day
Eyeglasses
 80 yuan per yuan (< 0.10 yuan per day)
Deworming
 1-2 yuan per year
Early Childhood Education
Computer room + Software + Teacher training
– Computer Assisted Learning
Conditional cash transfers for junior high students
Counseling programs
VET internships
Making High School Free
The Intervention
“Vitamin / Day”
Give students one over
the counter multivitamin with iron per
day (5 mg of iron) …
from November 2008
to May 2009
(≈4 US cents/day)
Chewable Vitamin per Day
Impact of vitamin on students:
Hemoglobin Points
Anemia Rates (%)
Math Test Scores (std. dev.)
250 Quanta Computers into 50
Migrant Schools in Beijing …
490 Desktop Computers into Rural
Schools in the Mountains of
Southern Shaanxi
550 ACER Computers into Rural
Schools into Some of the Poorest
Minority Schools in Qinghai
250 Quanta Computers into 50
Migrant Schools in Beijing …
490 Desktop Computers into Rural
Schools in the Mountains of
Southern Shaanxi
550 ACER Computers into Rural
Schools into Some of the Poorest
Minority Schools in Qinghai
250 Quanta Computers into 50
Migrant Schools in Beijing …
490 Desktop Computers into Rural
Schools in the Mountains of
Southern Shaanxi
550 ACER Computers into Rural
Schools into Some of the Poorest
Minority Schools in Qinghai
Impact of Computer Assisted Learning
Program on Student Learning
Standard Deviations
0.5
0.4
Control
CAL
Control
CAL
Control
CAL
0.3
0.2
0.1
0
Beijing Migrant
Students
Shaanxi Rural
Schools
Qinghai Migrant
School
My Group (REAP)
with the support of many in China, the US
and elsewhere in the world …
has shown that these work to improve
health, nutrition and education …
And, government is willing to partner to
upscale …
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Can China Afford This?
• Better classrooms / Better teachers / Better curriculum
•
•
•
•
•
•
•
•
•
Vitamin / day  0.2 yuan per day
Eyeglasses
 80 yuan per yuan (< 0.10 yuan per day)
Deworming
 1-2 yuan per year
Early Childhood Education
Computer room + Software + Teacher training
– Computer Assisted Learning
Conditional cash transfers for junior high students
Counseling programs
VET internships
Making High School Free
Yes … easy …
• Keep its promises:
Government promised to spend 4% of budget
to education [have never made it]
• Reallocate (Half of Moon Budget)
• Allocate all increases fiscal funds from
today on (don’t displace any current
programs)
What if China can not overcome the
[BIG] human capital challenge?
• If human capital does not rise, will China stop growing?
• What happens if there are two distinct classes … haves
and have nots … and China’s growth slows?
• What happens if there are:
200 million or more unemployed?
80 million unmarried?
There will only be two choices for the unemployed in China (they will NOT be
able to cross the border into a neighboring rich country) … they will either seek
employment in the informal economy OR seek refuge in organized crime [this is
NOT new in Chinese history]
I hope that we can choose “Optimism”
“there is exactly enough time … starting
now!”
But, the time is now … the clock is ticking!
Thank You!
http://reap.stanford.edu
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