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AEC 2012 - Impact of Human Capital Endowments on Inequality of Outcomes in Cameroon

16-Oct-2012

This paper sets out to evaluate the impact of human capital endowments on measured inequality using the 2007 Cameroon household consumption survey. In particular, the paper (1) estimates determinants of household economic well-being using the control function econometric approach in which human capital endowments are considered as endogenous effort-related regressors, while controlling for exogenous circumstance-related variables; (2) simulates alternative counterfactual distributions of household economic well-being: one in which human capital endowments are equalized; and the other in which variations are entirely attributable to the unobservable terms, and (3) compares inequality in the factual distribution of household wellbeing with inequality in each of the simulated distributions. The results show that human capital endowments (education and health) correlate positively and significantly with household economic well-being. Direct and indirect exogenous opportunity-inducing circumstances are inequality-augmenting, whereas human capital endowments are inequality-reducing. Education and health interventions would, therefore, be primordial in driving well-being and mitigating inequality. Thus, leveling the playing ground for individuals to have equitable exposure to health, education, professional training and labour market participation irrespective of gender or region of origin is required for a low-income country like Cameroon to enhance equity and sustainable household economic growth.

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