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Series

• Other papers. [More in this series]
• World Bank e-Library. [More in this series]

Summary note

The Human Capital Index (HCI) Compass is a guidance note for clients' own assessment of progress towards HCI. The launch of the Human Capital Index (HCI) in October 2018 spurred an interesting conversation on the state of the world in terms of preparing the current generation to the challenges of the future labor market. By successfully highlighting the depth of the human capital crisis and enabling policy makers to see spending in the social sectors as investments that reap benefits in the long run, the index demonstrated its usefulness as an advocacy tool. Partly due to the success of the advocacy effort, the immediate questions policy makers posed were 'what to do to improve the HCI?' and 'how best to track progress considering the slowly-moving nature of the index. The HCI Compass is a response to this query. First, it aims to help countries answer the question: "What do we need to do to improve our HCI and its sub components (child survival, adult survival, stunting, years of schooling, test scores)?" It does so by providing a checklist of key policies, legal framework and aspects of service delivery that characterize countries with good human capital outcomes and/or are proven to be important to improving the key components of the HCI. Pinpointing the set of policies and interventions that drive human capital outcomes is complicated by the fact that the underlying production function and how the different factors interact to produce outcomes is not straight forward. As such, some of the policies and service delivery indicators identified in the compass could be mere correlates rather than determinants of human capital formation. The relative importance of the indicators would also vary based on where a country currently stands and as such, the need to tailor it to each country context. Second, it aims to help countries answer the linked questions: "How well are these policies working? And how do we know we are on track?" It does so by identifying intermediate outcome variables and benchmark variables that will help policymakers assess progress on the ground towards a better HCI. We can think of these variables both as the intermediate results of the policies recommended above, and as "leading indicators" of what will happen to the HCI over time.

Other title(s)

Human Capital Project

Doi

• 10.1596/33671

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