Human Capital Productivity, and Labor Allocation in Rural Pakistan
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This paper investigates whether human capital affects the productivity and labor
allocation of rural households in four districts of Pakistan. The investigation shows that
households with better-educated males earn higher off-farm income and divert labor
resources away from farm activities toward nonfarm work. Education has no significant
effect on productivity in crop and livestock production. The effect of human capital on
household incomes is partly realized through the reallocation of labor from low-productivity
activities to nonfarm work. Female education and nutrition do not affect
productivity and labor allocation in any systematic fashion, a finding that is consistent with
the marginal role women play in market-oriented activities in Pakistan. As a by-product,
our estimation approach also tests the existence of perfect labor and factor markets; the
hypothesis that such markets exist is strongly rejected.