Human Capital Development and Household Income Growth in Burkina Faso: Using the Decomposition Method to Understand the Relationship Between the Two

Understanding how much human capital accumulation and human capital variables contribute to explaining income growth in Burkina Faso is the main objective of this paper. The paper contributes to the literature on link between human capital development and prosperity of occupied people, by applying a new perspective based on the use of the OaxacaBlinder variance decomposition procedure. This methodology makes it possible to quantify the relative contribution of each explanatory factor to income growth, and also allows distinguishing both factors endowment effect and returns to endowment effect. The analysis is applied to data of household Living Standards Measurement Surveys conducted in 2009, 2014 and 2018. We found that the endowment in human capital, health, nutrition, education, and productive employment, has a positive and significant influence on income of occupied people. In addition, the decomposition method revealed that the impact of human capital factors on income growth is all the greater when the contributions of the endowment effect and the return effect are both positive and high.