Are Returns to Investment Lower for the Poor? Human and Physical Capital Interactions in Rural Vietnam
If the marginal gains from investment in physical capital depend positively on knowledge, but a household cannot hire skilled labor to compensate for low skills, then even if it has access to credit, the household will achieve lower returns than an educated household. If, as is common, the income-poor are less educated because of failures in the credit market, and because they live in areas where there is less access to schooling, then the poor will also have lower returns on investments. The author tests this argument for the case of irrigation infrastructure in Vietnam.