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Human capital values and returns: Bounds implied by earnings and asset returns data

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Author Info

  • Huggett, Mark
  • Kaplan, Greg

Abstract

We provide theory for calculating bounds on both the value of an individual[modifier letter apostrophe]s human capital and the return on an individual[modifier letter apostrophe]s human capital, given knowledge of the process governing earnings and financial asset returns. We calculate bounds using U.S. data on male earnings and financial asset returns. The large idiosyncratic component of earnings risk implies that bounds on values and returns are quite loose. However, when aggregate shocks are the only source of earnings risk, both bounds are tight.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 146 (2011)
Issue (Month): 3 (May)
Pages: 897-919

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Handle: RePEc:eee:jetheo:v:146:y:2011:i:3:p:897-919

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Value of human capital Return on human capital Asset pricing;

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References

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  1. Mark Huggett & Gustavo Ventura & Amir Yaron, 2010. "Sources of Lifetime Inequality," Working Papers 2011-020, Human Capital and Economic Opportunity Working Group.
  2. Storesletten, Kjetil & Telmer, Christopher I. & Yaron, Amir, 2004. "Consumption and risk sharing over the life cycle," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 609-633, April.
  3. Costas Meghir & Luigi Pistaferri, 2010. "Earnings, Consumption and Lifecycle Choices," NBER Working Papers 15914, National Bureau of Economic Research, Inc.
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Cited by:
  1. New York University & Farzad Saidi, 2011. "Networks, Finance, and Development: Evidence from Hunter-Gatherers," 2011 Meeting Papers 615, Society for Economic Dynamics.
  2. Mark Huggett & Greg Kaplan, 2012. "The Money Value of a Man," PIER Working Paper Archive 12-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Corbae, Dean & Marimon, Ramon, 2011. "Introduction to Incompleteness and Uncertainty in Economics," Journal of Economic Theory, Elsevier, vol. 146(3), pages 775-784, May.
  4. Runli Xie, 2011. "Human Capital Formation on Skill-Specific Labor Markets," SFB 649 Discussion Papers SFB649DP2011-011, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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