The Persistence of Human Capital

I just ran across a really interesting working paper by Rocha, Ferraz, and Soares called “Human Capital Persistence and Development.”  They take advantage of a historical curiosity in Brazil to explore whether human capital differences last over time and if so, how much that was reflected in per-capita income.

Here they describe the historical curiosity;

“After the international ban on slave trade in 1850, and in the midst of a massive inflow of European immigrants to Brazil, immigrants with relatively more education were channeled into specific localities through deliberate government policies. In the end of the 19th century and beginning of the 20th century, public authorities established a number of official settlement colonies throughout the state of São Paulo. This policy had goals involving occupation of territory, food production, “whitening” of the population, and was driven by a centralized decision at the state level. The settlements were established typically near previously existing rural villages and were occupied by relatively high- skill European immigrants of various nationalities.”

Amongst other things, one of the reasons this is so interesting is that the state-sponsored settlements were not appreciably different from other regions except for the fact that they had higher levels of schooling on average.

So what did they find?

First, “in 1920, a few years after the establishment of the last settlements, the literacy rate in settlement municipalities was 8 percentage points (or 27 percent) higher than elsewhere in the state, despite an only marginally higher share of immigrants.”

Second, one century later, people living in those regions had an average of more than half a year of schooling, and more than 15% higher average per-capita incomes, than people living in other municipalities.  That’s pretty amazing after 100 years.

It reminds me of the Western European economic growth after WWII, which was said at least anecdotally to have been helped by high human capital levels pre-war.  The paper has more interesting parts and is definitely worth checking out in full.