> **来源：[研报客](https://pc.yanbaoke.cn)** # Building Human Capital Where It Matters Homes, Neighborhoods, and Workplaces Alaka Holla, Norbert Schady, and Joana Silva Editors # Building Human Capital Where It Matters # Reproducible Research Repository https://reproducibility.worldbank.org A reproducibility package is available for this book in the Reproducible Research Repository at https://reproducibility.worldbank.org/catalog/461. # Building Human Capital Where It Matters Homes, Neighborhoods, and Workplaces Alaka Holla, Norbert Schady, and Joana Silva Editors © 2026 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1234 29282726 This work is a product of the staff of The World Bank with external contributions. 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The Library of Congress Control Number has been requested. # Contents Foreword ix Acknowledgments xi About the Editors and Contributors xiii Main Messages xvii Executive Summary 1 1 Introduction 1 # Norbert Schady Why is human capital so important? 2 Human capital: Stagnating in low- and lower-middle-income countries 4 The importance of settings to human capital policy 9 Notes 12 References 13 2 Human Capital Accumulation in the Home 16 # Alaka Holla The home matters 18 Why does the home matter? 22 Policy recommendations 32 Notes 42 References 43 3 Human Capital Accumulation in Neighborhoods 50 Andres Yi Chang, Patrick Hoang-Vu Eozenou, and Ildo Lautharte The neighborhood matters 52 Why neighborhoods matter 55 Policy implications 60 Conclusion: Putting it all together 65 Notes 66 References 67 4 Human Capital Accumulation at Work 72 # Joana Silva The workplace matters 74 What limits human capital accumulation at work? 75 Policy recommendations 86 Conclusion: Putting it all together 99 Notes 99 References 101 # 5 Implementing a Settings Approach in Policy 106 Alaka Holla, Norbert Schady, and Joana Silva A settings lens to solve human development challenges 109 Reforms aimed at settings can spur gains in human capital 111 Tracking progress: A national and global data agenda 118 Conclusion 124 Notes 125 References 125 # Boxes 2.1 Violent punishment at home: Belief versus behavior 24 3.1 Defining neighborhoods as a geographic concept 52 4.1 Measuring learning at work 79 4.2 Labor income grows more slowly during periods of self-employment or during work at small firms 81 4.3 Childcare and women's labor force participation 90 4.4 Shifting gender perceptions and addressing security concerns 93 4.5 Expanding the focus of human capital policy to the workplace is critical for jobs 97 5.1 Reducing malnutrition in Indonesia and Peru 111 5.2 A social registry as a tool for integration 114 5.3 A research agenda 122 # Figures ES.1 Human capital is built in the home, in the neighborhood, and in the workplace xxii ES.2 Learning has stagnated in many parts of the world xxiii ES.3 Early skill deficits persist xxv ES.4 Neighborhood characteristics shape human capital in Brazil xxvii ES.5 Returns to experience are lower among the self-employed than among wage workers in low- and middle-income countries xxix ES.6 Policy priorities for the home, the neighborhood, and the workplace xxx 1.1 Changes in adult height, by country income group 5 1.2 School enrollment and the tertiary completion rate 6 1.3 Student learning across countries 6 1.4 Trends in labor force participation rates, prime-age adults, ages 25-54, 2004-24 1.5 Labor income as a function of on-the-job experience, men ages 18-67, by country income status 8 2.1 Human capital investment at home across the life cycle 18 2.2 Child nutrition and skills, by maternal educational attainment 20 2.3 Skill deficits among children, by maternal educational attainment 21 2.4 Skills in childhood, by resources and care at home 22 B2.1.1 Use and endorsement of violent punishment to discipline children ages 1-14 25 2.5 Resources build human capital across the life cycle 28 2.6 Share of children ages 5-14 living with neither parent 29 2.7 Selected indicators of well-being, children ages 10-17, by left-behind status, China 31 2.8 Lifelong effects of preschool and parenting programs 37 3.1 Neighborhoods affect human capital through distinct channels 53 3.2 Neighborhood poverty in childhood and outcomes in adulthood, Brazil 54 3.3 Households use local schools and local health facilities 56 3.4 School and health care quality varies substantially across villages 57 3.5 Village sanitation coverage is key to controlling waterborne disease in India 58 3.6 Probability of secondary-school graduation, by gang territory, San Salvador, El Salvador 60 4.1 How learning occurs in various contexts 75 4.2 Most people are in jobs that offer little opportunity for learning at work 78 4.3 Farmer productivity on small plots in Sub-Saharan Africa does not increase much with experience 80 4.4 Returns to experience are lower among the self-employed than among wage workers 81 B4.2.1 Panel data confirm low returns to experience during self-employment in China and India 83 4.5 Returns to experience are lower for the self-employed and wage workers in small firms than for wage workers in medium and large firms 84 4.6 Population not accumulating human capital through work 85 4.7 Soft skills training on the job raises productivity among trained workers and has knowledge spillovers to untrained coworkers 88 B4.3.1 Survey response: Do you agree that a preschooler suffers if the mother is working? 92 B4.5.1 The virtuous cycle of more human capital and better jobs 97 5.1 What needs to happen in the home, in the neighborhood, and in the workplace to avoid malnutrition 110 5.2 Profile of a social registry 114 5.3 The progression toward a fully developed data system 121 # Map 3.1 Gang control, by neighborhood, San Salvador, El Salvador 60 # Tables 2.1 Evidence on increasing resources at home among poor families 33 2.2 Evidence on improving care environments for children and adolescents 35 3.1 Human capital policies for struggling neighborhoods 61 4.1 How human capital accumulates at work 74 4.2 Opportunities for human capital accumulation, by job type 76 4.3 Evidence on policies that promote more learning on the job 87 4.4 Evidence on policies that remove barriers to the participation of women and youth in the labor markets 95 4.5 Evidence on policies to create more high human capital jobs 98 5.1 Outcome measures to track progress in human capital accumulation 119 5.2 Input measures to track progress in human capital accumulation 120 # Foreword Human capital—people's health, skills, and knowledge—is the most valuable asset any society possesses. It is the foundation of economic growth, poverty reduction, and shared prosperity. No country has achieved sustained development without investing in it. Global trends in human capital outcomes show that progress in human capital is stalling if not reversing in many low- and middle-income countries. Children today are less likely than children 15 years ago to read with understanding or be able to do basic mathematics problems. Adult height—a marker of population health—has declined in many places. Most workers in low- and middle-income countries are in jobs with limited formal training or on-the-job learning opportunities. Women and youth are especially affected. Only 40 percent of women are in paid employment, and nearly one in five young people are neither working nor studying. These trends matter because differences in human capital account for roughly two-thirds of the gap in per capita income between rich and poor countries. This report argues that reversing these trends requires rethinking how human capital policy is designed and delivered. Much of the existing policy and research agenda has focused on expanding access to and improving the quality of health and education services or on specific stages of the life cycle. While essential, these approaches are not sufficient. Human capital is built not only through systems but also in specific settings—most importantly in homes, neighborhoods, and workplaces—where daily decisions, interactions, and opportunities shape outcomes over time. This report puts forward a simple but underappreciated observation: human capital is not built in sectors alone, nor only at specific stages of life. It is built—slowly, unevenly, and often invisibly—in places: through the health of a child, the quality of a classroom, the safety of a neighborhood, and the learning that takes place or fails to take place at work. In homes, nutrition, care, and early stimulation shape lifelong trajectories. In neighborhoods, the quality of schools, health services, infrastructure, safety, and social norms influence what people can become. And, in workplaces, skills are refined, or they are wasted, and learning by doing can either accelerate productivity or leave workers stuck in low-return activities. By adopting a settings-based lens, this report complements sectoral and lifecycle approaches and offers a more well-integrated framework for action. It shows how constraints in one setting can undermine investments made in another, and how coordinated action across homes, neighborhoods, and workplaces can unlock far greater returns. It also highlights the roles of public and private actors and the importance of more closely aligning financing, incentives, and institutions to support human capital accumulation where it actually happens. At a moment when countries face overlapping challenges from demographic shifts and rapid technological change to climate shocks and fragility, investing more effectively in human capital is not optional. It is foundational. This report offers practical insights and policy priorities to help countries move from fragmented interventions to coherent, people-centered strategies. It aims to support governments and partners in renewing progress on human capital accumulation and unlocking people's potential. And, in doing so, it seeks to restore progress where it has stalled and expand opportunities where they have been out of reach. Mamta Murthi Vice President, People World Bank Group # Acknowledgments This report would not have been possible without the generous support of a team of colleagues and collaborators. Special thanks are due to Mamta Murthi, Vice President for the People Vertical of the World Bank Group, for her leadership. Dena Ringold, Director, Strategy and Operations for the People Vertical of the World Bank Group, provided valuable guidance and support. The report also benefited from the guidance of Hana Brixi, Eliana Carranza, Halil Dundar, Indermit Gill, Jamele Rigolini, Alberto Rodriguez, Michal Rutkowski, Fadia M. Saadah, and Jaime Saavedra. The empirical analyses presented in this volume greatly benefited from the expertise and many contributions of Brian Stacy, who provided valuable inputs to chapter 1 and the publication as a whole. He led the production of the report's reproducibility package. Francisco Bivar, Sergio Padilla, and Shuqiao Sun in the People Chief Economist Office provided outstanding research assistance. Florence Kondylis supplied valuable material related to agricultural labor markets. The report was shaped by multiple in-country consultations with government, civil society, and private sector representatives. The authors are especially grateful to Caroline Vagneron for leading these consultations and to Heba Elgazzar, René Antonio Leon Solano, and Facundo Cuevas for organizing these consultations in country and providing insights on the applicability of the report's findings to current policy agendas. In-person consultations were held in Brazil, Colombia, Côte d'lvoire, El Salvador, Poland, Tajikistan, and Türkiye, complemented by shorter virtual events in other countries. Several consultations were also held with academia and international institutions, including Paris School of Economics, Institut d'Études Politiques de Paris, Opportunity Insights at Harvard University, University of Oslo, Organisation for Economic Co-operation and Development, Center for Global Development, and African Economic Research Consortium-Kenya. The report benefited considerably from the comments and suggestions of peer reviewers, including Ndiame Diop, Roberta Gatti, Aart Kraay, Denis Medvedev, Martin Raiser, Martin Rama, and Hirokazu Yoshikawa, at the decision meeting stage, and Pedro Carneiro, Ndiame Diop, Pascaline Dupas, Deon Filmer, Roberta Gatti, Aart Kraay, Santiago Levy, David McKenzie, and Carolina Sanchez Palermo, at the concept note stage. The analyses and interpretations also benefited from the generous insights of Gabriel Demombynes, Shanta Devarajan, Raquel Fernandez, Deon Filmer, John N. Friedman, Aart Kraay, Martin Rama, Michal Rutkowski, and Hirokazu Yoshikawa during a quality enhancement review. The authors are grateful for the insightful comments of World Bank colleagues, including Luis Benveniste, Ousmane Dione, Doerte Doemeland, Elisabeth Huybens, Sebastian Molineus, Renaud Seligmann, Ayat Soliman, Juan Pablo Uribe, Anna Wellenstein, and Marina Wes. The authors are very grateful to the External and Corporate Relations team of the World Bank, especially Christine Montgomery, Nandita Roy, Giannina Raffo, Margaret Allen, Erick Rabemananoro, Hellen Wagura, Joe Qian, Maria Elisa Costa, and Sidronio Araujo. Special thanks also go to Maarten Lambrechts and Divyanshi Wadhwa for their work on creating the interactive versions of figures that appear in the report, and to Karen Hoyos Baza for her assistance in keeping all report activities on schedule. Nicole Hamam designed the volume, including the cover art. Nancy Morrison skillfully edited the report, which was copyedited by Robert Zimmermann. Gwenda Larsen and Ann O'Malley proofread the typeset pages, and Stephen Pazdan in the World Bank's formal publishing program coordinated production of the volume. # About the Editors and Contributors # Editors Alaka Holla is a Lead Economist in the Office of the Chief Economist for People and the Office of the Chief Statistician of the World Bank Group. Holla is also the Program Manager of the World Bank's Strategic Impact Evaluation Fund, a multidonor trust fund that promotes the use of randomized controlled trials, quasi-experimental methods, and evidence aggregation to inform policies in education, health, water and sanitation, and early childhood development in low- and middle-income countries. Since joining the World Bank as a Young Professional, she has worked in both research and operational settings in a diverse set of country contexts and on multilateral initiatives to promote the measurement of child development and the costing of programs. Holla's work has appeared in peer-reviewed publications such as American Economic Review, Health Affairs, and Journal of Public Economics. She has been a coauthor of World Bank reports, including the flagship World Development Report 2015: Mind, Society, and Behavior; Citizens and Service Delivery: Assessing the Use of Social Accountability Approaches in the Human Development Sectors; and Collapse and Recovery: How the COVID-19 Pandemic Eroded Human Capital and What to Do About It. Her research has focused on the quality of health care, early childhood development and education, discrimination, and cost analysis. Holla received a PhD in economics from Brown University. Norbert Schady is Chief Economist for People at the World Bank Group. He was Principal Economic Adviser, Social Sector, at the Inter-American Development Bank (2010-21). At the World Bank, he was Senior Economist in the Development Research Group (2003-10), Economist in the Poverty Group in the Latin America and Caribbean Region (2000-03), and a Young Professional (1998-2000). He has taught at Georgetown University and Princeton University. Schady has published extensively in academic journals, including American Economic Journal: Applied Economics; American Economic Journal: Economic Policy; Journal of Development Economics; Journal of Human Resources; Quarterly Journal of Economics; and Review of Economics and Statistics. He is also the author or coauthor of numerous flagship reports, including The Early Years: Child Well-Being and the Role of Public Policy; Conditional Cash Transfers: Reducing Present and Future Poverty; Closing the Gap in Education and Technology; and Collapse and Recovery: How the COVID-19 Pandemic Eroded Human Capital and What to Do About It. Schady's main research areas are early childhood development, teacher quality, cash transfer programs, and the effects of economic contractions on the accumulation of human capital. He received a BA from Yale University and a PhD from Princeton University. Joana Silva is Deputy Chief Economist for People at the World Bank Group and an associate professor at Católica Lisbon School of Business and Economics. She has expertise in applied economics, labor economics, international economics, development economics, and public economics. Silva has led several World Bank lending operations and has extensive experience advising governments, in particular, on the design, implementation, and evaluation of economic reforms, social programs, and monitoring and evaluation systems. Her research has been published in leading academic journals, including American Economic Review, Econometrica, and Journal of International Economics. She has coauthored six books, including four World Bank regional flagship reports: Employment in Crisis: The Path to Better Jobs in a Post-COVID-19 Latin America; Wage Inequality in Latin America: Understanding the Past to Prepare for the Future; Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa; and Collapse and Recovery: How the COVID-19 Pandemic Eroded Human Capital and What to Do About It. She holds a PhD in economics from the University of Nottingham. # Contributors Patrick Hoang-Vu Eozenou is a Senior Economist in the Global Engagement Unit of the Health, Nutrition, and Population Global Practice at the World Bank. He has more than 15 years of experience in development economics, with a focus on poverty, health financing, equity, and financial protection. Before joining the World Bank as a Young Professional, he was a postdoctoral fellow at the International Food Policy Research Institute, where he worked on the evaluation of nutrition and agricultural interventions in rural settings. Eozenou has led World Bank health operations in Mali, and he has led the World Bank's engagement on joint World Bank-World Health Organization monitoring of universal health coverage and has contributed to several flagship reports. His research has been published in peer-reviewed journals, including the Journal of Development Economics and The Lancet Global Health. Eozenou holds a PhD in economics from the European University Institute. Ildo Lautharte is a Senior Economist in the Education Global Practice at the World Bank Group. His work spans both operations and research, with a focus on foundational skills and learning recovery after the COVID-19 pandemic. His research has appeared in peer-reviewed academic journals, including Economics of Education Review and the Journal of Health Economics. Lautharte has also coauthored World Bank country reports, such as the Brazil Human Capital Review and the Amazon Economic Memorandum. He received a PhD from the University of Cambridge in 2018, where he received the James Claydon Prize in Economics from St. Edmund's College. Andres Yi Chang is an Economist in the Education and Skills Global Unit at the World Bank Group, specializing in human capital and skills development in low- and middle-income countries. He previously served in the Office of the Chief Economist for People, where he managed the Service Delivery Indicators program. His research spans learning trajectories, educational inequalities, teacher perspectives on education policy, the effects of COVID-19 and rising temperatures on learning outcomes, and health service delivery. His work has appeared in Health Affairs Scholar, International Journal of Educational Development, and Journal of Public Economics. He coauthored Collapse and Recovery: How the COVID-19 Pandemic Eroded Human Capital and What to Do About It. Earlier in his career, Yi Chang held research and policy roles at the World Bank Group Development Research Group, Yale University, the Organization of American States, the Pan American Health Organization, and Leibniz University Hannover. He holds a BA from the University of California, Berkeley, and an MA in international development and economics from Yale University. # Main Messages Human capital—the health, knowledge, and skills of people—is what people need to thrive. It is what families and communities need to prosper and what individuals need to find good jobs. Building human capital is not only about what we do. It is also about where we do it. Policies usually focus on improving schools and health clinics to build more human capital. This report shows that a person's home, neighborhood, and workplace matter just as much and deserve more attention in policy. The report begins by examining global trends in human capital development. There has been a shocking lack of progress in key outcomes. Despite rising incomes and reductions in poverty, two-thirds of low- and middle-income countries have experienced a decline in health, learning, or on-the-job skill development over the past 15 years. For example, average adult height—a marker of population health—has declined in many places. Student learning—measured by harmonized test scores—has remained stagnant in low- and lower-middle-income countries; in most countries, scores are even worse today than in 2010. Similarly, female labor force participation has remained low and stagnant in low- and middle-income countries. Part of the strategy to reverse these disappointing trends must acknowledge all the settings where human capital is built. Investment in the home, the neighborhood, and the workplace needs to be accelerated. # THE HOME What happens early in life—at home—is decisive for skill development and success. A family's resources and the choices families make about their children's care, health, and learning can have lifelong impacts. For instance, this report demonstrates that children and adolescents whose mothers have more education perform better in tests of vocabulary and mathematics than children whose mothers have less education. These gaps emerge before the age of 5. They remain constant throughout childhood and adolescence. Resources at home are clearly important. They allow families to buy books or pay university tuition. But resources alone are not sufficient. The care a child receives at home is vital. Care involves nurturing, reading, and playing with children. Care involves helping children navigate emotions. Care involves keeping children safe. This report demonstrates that resources do not compensate for shortfalls in care. Strengthening human capital accumulation at home calls for policies that increase resources within the home and that support families in providing the care children need to thrive. These include job programs and cash transfers for poor families. They also include providing parents with tools to create stimulating and nurturing home environments. The evidence summarized in this report from around the world shows that such programs improve educational attainment and lifelong health. They also translate into higher earnings when children join the labor force as adults. # THE NEIGHBORHOOD Neighborhoods play a key role in productivity and people's well-being. They provide access to quality schools, health care, safe streets, and job opportunities. Two families with the same income may not build the same level of human capital if they live in different neighborhoods. For example, evidence from Brazil shows that a person who grew up in a low-income household in a low-income neighborhood earns half as much in adulthood as a person who grew up in a low-income household in a high-income neighborhood. Neighborhoods matter so much for two reasons. First, people typically go to schools and clinics in their own neighborhoods. If these services are inadequate, this will certainly affect learning and health outcomes. Second, even if schools and clinics are good in a neighborhood, other problems, such as violence and pollution, can limit access and opportunity. For policy, a neighborhood lens means bringing together different sectors. Sometimes, unlikely partners, such as government departments focusing on education, the environment, and infrastructure, must act together to improve human capital outcomes. # THE WORKPLACE The workplace matters for human development as well. People often think of a job as an end goal, the place where skills are put to use. Yet, learning continues in the workplace. Indeed, half the total human capital accumulated over a lifetime is acquired at work. Through training and experience, people build skills. This report shows that about 70 percent of workers in low- and middle-income countries are in small-scale agriculture, low-quality self-employment, or microfirms with no more than five workers. These jobs generally offer only limited opportunities for learning. Even with the same gain in experience, earnings increase only half as much among the self-employed as among salaried workers. Countries need to invest more in policies that make work a better engine of learning. Governments and stakeholders can support employer-provided training and promote a learning culture in existing jobs. For example, in India, an on-the-job soft skills training program raised the productivity of garment workers by over 13 percent and improved the productivity of untrained coworkers by almost 12 percent. Stakeholders can also upskill labor market entrants and help them match with jobs through job platforms and formal and informal apprenticeships. This report's review of large-scale apprenticeship programs in Colombia, Côte d'lvoire, and Nigeria shows that they increased both skills and earnings. Countries can also increase women's participation in the workforce by investing in childcare and ensuring a safe commute to work. Well-designed incentives and regulations that support firm growth can result in more high human capital jobs and, therefore, more learning on the job. In all these efforts, the private sector is an essential partner. Recognizing the importance of the home, the neighborhood, and the workplace expands the set of policy options to improve productivity and well-being. This report provides examples of countries that have successfully integrated investments in these key settings, including collaboration with the private sector, to solve human capital challenges, such as malnutrition and low on-the-job learning. The report also argues for a more ambitious data agenda to track progress in these settings more closely and proposes the main building blocks of this agenda. An integrated settings approach and the collection and use of more data are what is needed to build human capital where it matters. # Executive Summary Human capital—health, skills, knowledge, and experience—is what people need to thrive. It is also what is needed for families and communities to prosper and for people to find good jobs. No country has ever achieved sustained periods of economic growth or significant reductions in poverty without investing in human capital. Much of policy and research on human capital has focused either on a sector (such as education, health care, or social protection), or on an age-group (such as children under age 5). This is not surprising. National ministries (or their subnational counterparts) are organized along sectoral lines. The life cycle, meanwhile, has been the standard organizing framework to analyze the accumulation of human capital for decades. This report complements the sectoral and life-cycle approaches to human capital by focusing on the settings where human capital is built and what this implies for policies to increase human capital accumulation in an economy. The report takes stock of trends in human capital across the world and presents evidence that the home, the neighborhood, and the workplace are critical and are often missing from human capital policy (refer to figure ES.1). Understanding the dynamics of human capital accumulation in these places can present opportunities to deploy public and private financing more effectively to raise the stocks and flows of human capital. # The stagnation in human capital accumulation Despite its importance to development, human capital accumulation has stagnated in many low- and middle-income countries (refer to chapter 1). In some dimensions, poorer countries exhibit worse outcomes today than they did two decades ago. For example, average adult height—a widely used proxy for latent health—rose by about 1 centimeter per decade in Western Europe during the twentieth century and FIGURE ES.1 Human capital is built in the home, in the neighborhood, and in the workplace Source: Original figure for this publication. FIGURE ES.2 Learning has stagnated in many parts of the world HLO test scores, 2025 Sources: HLO (Harmonized Learning Outcomes) Database, World Bank, https://datacatalog.worldbank.org/search/dataset/0038001; World Bank Income Groups, 2024. Note: The data displayed refer to countries with HLO data for both 2010 and 2025. Country groupings are based on the 2024 income classification. For data by region and country, refer to the interactive figures online at https://humancapital.worldbank.org/en/building-human-capital-where-it-matters. at a similar pace in China in recent decades, but, in several Sub-Saharan African countries, adults are shorter today than they were 25 years ago, indicating a deterioration in underlying health. Learning outcomes show an equally troubling pattern. On average, children in low- and lower-middle-income countries show lower achievement levels today than they did 15 years ago. The largest declines have been observed in Sub-Saharan Africa (refer to figure ES.2). Skill development at work also exhibits worrisome trends. On average, an individual acquires only about half as much human capital through work in India relative to Brazil, and an individual in Brazil only half as much as an individual in the United States. # A settings lens for human capital accumulation Without significant investment in health care, education, and on-the-job learning, low- and middle-income countries will continue to fall behind. This report argues that focusing on how human capital outcomes are shaped in the home, in the neighborhood, and in the workplace will help governments and stakeholders design more effective policies to increase human capital, which will lead to more well-paying jobs, less poverty, and higher levels of economic growth. # Human capital accumulation in the home Family background shapes human capital accumulation from the start (refer to chapter 2). By the time they are 5 years old and before they have attended school, children in rural Peru whose mothers have primary educational attainment or less have roughly half the vocabulary relative to children whose mothers have completed at least secondary school. Broadly similar patterns are apparent in Ethiopia, India, and Viet Nam. The disadvantage persists throughout school age and adolescence (refer to figure ES.3). The children of mothers with lower educational attainment never catch up. These patterns reflect differing conditions within the home. Why does the home matter so much? One reason is because families vary in their access to resources. To thrive, children need nutritious food, safe and sanitary living conditions, and opportunities to learn. Many of these needs can be met only if families spend money. Healthier foods and diets tend to cost more than less healthy options, and, even if schools and health care are provided free of charge, families still need to purchase books and medicines and cover transportation costs. Homes also vary a great deal in the care environment, that is, how much time parents invest in helping children learn, how much they play with their children, their style in maintaining discipline, and how much social-emotional support they offer to children and adolescents. Children's early development increases with the number of care or stimulation activities at home, such as an adult singing or playing with a child. Both resources and care matter, but resources cannot easily make up for low-quality care. This can be observed with data on China, where millions of children are left by their parents in the care of other relatives when the parents move from rural to urban areas in search of better jobs. These left-behind children live in homes with higher household income, but they do worse on tests of mathematics and language and exhibit higher levels of depression. In some parts of the world, there are also substantial differences by sex in the resources and care that children receive in the same household. Because resources and care both matter, policies that increase resources or improve the quality of care generally improve human capital outcomes. The availability of more resources, either through higher earnings or through cash transfers, has been shown to improve child outcomes in many settings. Parenting programs that are aimed at changing the care environment in the home can also have large positive effects on FIGURE ES.3 Early skill deficits persist a. Ethiopia Child's ranking for vocabulary (percentile) Child's ranking for mathematics (percentile) b. India Child's ranking for vocabulary (percentile) Child's ranking for mathematics (percentile) c. Peru Child's ranking for vocabulary (percentile) Child's ranking for mathematics (percentile) d. Viet Nam Child's ranking for vocabulary (percentile) Child's ranking for mathematics (percentile) Mother's educational attainment: Primary or less Some secondary or more Source: Original figure for this publication, using data of Young Lives Study (dashboard), Oxford Department of International Development, University of Oxford, https://www.younglives.org.uk/. Note: Percentile rankings were calculated separately by round, marked by points. Only the youngest cohort (individuals born in 2001) are included. The older cohort (children born in 1994) were not observed at age 5. Vocabulary refers to receptive vocabulary as measured by the Peabody Picture Vocabulary Test (Dunn and Dunn 1997). Mathematics skills are measured through a subset of questions from TIMSS (Trends in International Mathematics and Science Study) (data repository), International Association for the Evaluation of Educational Achievement, https://www.iea.nl/data-tools/repository/timss. For data by region and country, refer to the interactive figures online at https://humancapital.worldbank.org/en/building-human-capital-where-it-matters. children's human capital that can persist into adulthood. These interventions have frequently proven difficult to scale up, however. Alternatively, human capital accumulation can be achieved through programs that increase the coverage of preschool. These programs often allow women to join the labor force and, if the quality of preschool is high, can foster the development of cognitive and social-emotional skills that are rewarded in the labor market. Education can confer greater skills among parents as they build the human capital of their children. This is particularly true for women, who tend to bear most of the responsibility for providing care in the home. Therefore, policies that increase the education of girls will also increase the human capital of the next generation. # Human capital accumulation in the neighborhood Although the children of parents who have more resources and more education generally have substantially better human capital outcomes, the neighborhood (or village) where children grow up can also have substantial effects on human capital trajectories (refer to chapter 3). This has been shown in the United States and, more recently, in Brazil, where the children of low-income parents will complete two more years of schooling, learn more while in school, and earn twice as much in adulthood, if they grow up in a rich neighborhood rather than a poor neighborhood (refer to figure ES.4). Neighborhoods matter because families generally use their local school and local primary health center. In practice, the quality of these local services varies widely. In rural Punjab, Pakistan, for example, a child growing up in a village in the highest decile of school quality learns 44 percent more per year than a child in the lowest decile. Service availability is not the only neighborhood attribute that matters. Air quality, clean water, and sanitation are largely shaped by where people live, and these conditions can vary considerably across neighborhoods or villages. In Indonesia, for example, children living in open defecation-free communities during their first two years of life are more than 10 percentage points less likely to be stunted and have higher cognitive test scores than children living in communities where all other households defecate in the open. In Mexico, exposure to lead from battery recycling plants reduced cognitive development and school performance among children living close to the factories emitting the toxins. There is also substantial variation across neighborhoods in the exposure to violence that residents experience. In San Salvador, people living in gang-controlled neighborhoods had fewer assets, less income, and lower educational attainment even relative to people living only 50 meters away. Local role models matter, too. In India, exposure to the leadership of women on village councils has been shown to influence the career aspirations and educational attainment of adolescent girls. # FIGURE ES.4 Neighborhood characteristics shape human capital in Brazil a. Years of schooling Number of years b. Probability of formal employment Probability $(\%)$ c. Probability of earning more than parent Probability $(\%)$ d. Income at ages 25-29 Income (Brazilian reais) Source: Original figure for this publication, based on Britto et al. 2025. Note: The figure shows the relationship between the share of low-income parents in the neighborhood during childhood and the following measures of average adulthood outcomes of children from low-income families growing up in these neighborhoods: years of schooling, probability of formal employment, probability of earning more than parent, and income at ages 25-29. The scatterplots use an aggregation of neighborhoods as the observation unit. Neighborhoods are divided into 10 equal groups based on the percentage of low-income parents in each. Low income is defined as income at or below the 33rd percentile of the national income distribution. The share of low-income parents in the childhood neighborhood is used as a proxy for neighborhood characteristics growing up. For data by region and country, refer to the interactive figures online at https://humancapital.worldbank.org/en/building-human-capital-where-it-matters. In terms of policy, this means that it is important to target struggling neighborhoods and identify the main constraints that individuals face to accumulate human capital in these neighborhoods. Policies should provide resources and incentives to improve service quality, environmental quality, and social capital in struggling neighborhoods. # Human capital accumulation at work Traditionally, workplaces have been considered as settings where human capital is used. More recently, however, a consensus has emerged that human capital is also built at work. For example, a nurse will be more effective as she learns to work in a team of health professionals in a hospital and, critically, as she builds tacit knowledge on how to interact most effectively with patients. Although there is potential to accumulate significant human capital at work, relatively few people in low- and middle-income countries have an opportunity to do so (refer to chapter 4). Some people are not accumulating human capital at work because they are not even part of the labor force. In low- and middle-income countries, around 50 percent of women are out of the labor force, while around 20 percent of youth are neither studying nor working. Those who are employed, meanwhile, are concentrated in jobs where little learning occurs. Many workers are in small firms that operate with low technology and minimal organizational capital, often only front-line workers, without managers or engineers or other technical personnel. In fact, about 70 percent of workers in low- and middle-income countries, but only 20 percent in high-income countries, are working in small-scale agriculture, low-quality self-employment, or microfirms. These are generally jobs with limited formal training and few on-the-job learning opportunities. Even with the same gain in experience, earnings in low- and middle-income countries rise only half as much among the self-employed as among wage employees (refer to figure ES.5). These challenges call for policies that expand learning on the job, ease transitions into work, and create more jobs with strong learning potential. Formal apprenticeships, for instance, have had positive effects on skills and earnings, even when implemented at scale, in numerous Sub-Saharan African countries. These policies should be supported by broader reforms that reduce market failures and misallocation. Policies can increase learning on the job in all types of employment. Farmers can benefit from extension programs to learn new techniques and adopt new technologies. The self-employed can benefit from soft-skills and business training. Formal job training among wage workers can be effective, but it is undersupplied even in large firms. This is because workers can take their newly acquired skills and move to a different employer unless the training is firm-specific. Incentivizing firms FIGURE ES.5 Returns to experience are lower among the self-employed than among wage workers in low- and middle-income countries Sources: Original figure for this publication, based on data of GLD (Global Labor Database Repository), World Bank, https://worldbank.github.io/gld/README.html; I2D2 (International Income Distribution Database) (internal database, discontinued in 2020), World Bank; SEDLAC (Socio-Economic Database for Latin America and the Caribbean), https://www.cedlas.econo.unlp.edu.ar/wp/estadisticas/sedlac/. Note: The figure shows estimated experience–wage profiles for working-age men grouped by potential experience. Hourly wages are total labor earnings, divided by hours worked. Returns are calculated in five-year experience bins, following Jedwab et al. (2023), using population weights. The results exclude high-income countries. For data by region and country, refer to the interactive figures online at https://humancapital.worldbank.org/en/building-human-capital-where-it-matters. to invest in on-the-job training, particularly in the formation of general skills, can therefore help. Creating more jobs with stronger potential for learning requires incentives for firm growth and expanded education to develop needed talent. Governments and stakeholders can promote access to technology, finance, markets, and research and development (R&D), particularly among young, innovative firms that drive radical innovations and create jobs demanding skilled labor. Well-targeted R&D credits can have lasting effects on human capital and productivity. Facilitating firm growth and structural transformation—from subsistence agriculture and low-productivity services to modern firms—is therefore critical for human capital policy. # Integrating settings into policy to tackle long-standing challenges Human capital enables people to contribute productively to society. Within countries, investments in human capital spur economic growth and reduce inequality. Despite these well-recognized benefits, trends in human capital accumulation in low- and middle-income countries over the last two decades paint a bleak picture. In many countries, the situation has gotten worse, rather than better. This report argues that consideration of key settings in which human capital is built—the home, the neighborhood, and the workplace—allows governments to design and implement interventions more effectively to improve health status, raise educational attainment and achievement, and increase on-the-job learning. Figure ES.6 summarizes key policy priorities. Policies to strengthen human capital would benefit from a settings lens. Strategies to address malnutrition, for example, must address constraints in the home. Families need resources to purchase and prepare nutritious food, and they should engage in early stimulation activities with their children. Other interventions will need to target the neighborhood, including policies to ensure garbage collection, provide clean water and sanitation, and offer access to health centers. FIGURE ES.6 Policy priorities for the home, the neighborhood, and the workplace Source: Original figure for this publication. Workplaces are also important because parents and other caregivers need to have good jobs to be able to purchase the inputs required to provide a healthy diet. A policy to tackle malnutrition therefore requires coordinated action across the three settings: the home, the neighborhood, and the workplace. It also requires coordinated action across multiple sectors, including health care, social protection, agriculture, transport, water, sanitation, and labor, alongside regulation of the private sector and support for local food markets. The same logic can be used to design effective policies to increase lea