An Analysis of the Factors that Influence Human Capital Accumulation in Nicaragua: Evidence from Household Surveys

Abstract: This paper argues that the process of human capital accumulation in Nicaragua, as measured by school enrollment, is influenced by a combination of supply and demand factors that can be traced to households’ characteristics and the government’s educational agenda. By performing a probit estimation to analyze how the interaction of such factors affects the decision of the household to invest in education between 2005 and 2009 when the Nicaraguan educational system was severely transformed, this paper finds that demand variables are more likely to stimulate school enrollment and supply side variables are only significant for primary education, which might suggest that changes in the government’s agenda, as a result of changes in administration, have not drastically change the perception of the households towards education. Nicaraguan households are still reluctant at making investments in education given the high opportunity costs faced by individuals; this has great policy implications in terms of stimulating school enrollment.