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An Alternative Measure of Human Capital Stock

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  • Tao, Hung-Lin
  • Stinson, Thomas F.
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    Abstract

    An integrated approach for estimating the stock of human capital in the United States is developed which eliminates well known problems associated with both the cost and income based methods currently in use. Historical information on the cost of the educational investment made in base entrants (individuals who enter the full time labor force immediately following high school graduation) and the wage rate they receive upon entry into the work force is used to compute a rental rate for human capital. The human capital stock for other cohorts of the work force is then estimated using that rental rate and the reported earnings for each population subgroup. This method neutralizes the cost identification problems associated with the work of Kendrick and Eisner. It also allows a more realistic treatment of the depreciation and appreciation of human capital. When used to estimate a Cobb-Douglas production function of the U.S. economy for the period 1963-1988, this measure provided more explanatory power than hours of labor.

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    Bibliographic Info

    Paper provided by University of Minnesota, Economic Development Center in its series Bulletins with number 7466.

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    Date of creation: 1997
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    Handle: RePEc:ags:umedbu:7466

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    Keywords: Labor and Human Capital;

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    1. Geoffrey Carliner, 1982. "The Wages of Older Men," Journal of Human Resources, University of Wisconsin Press, vol. 17(1), pages 25-38.
    2. Haley, William J, 1976. "Estimation of the Earnings Profile from Optimal Human Capital Accumulation," Econometrica, Econometric Society, Econometric Society, vol. 44(6), pages 1223-38, November.
    3. Lau, Lawrence J. & Jamison, Dean T. & Liu, Shu-Cheng & Rivkin, Steven, 1993. "Education and economic growth Some cross-sectional evidence from Brazil," Journal of Development Economics, Elsevier, vol. 41(1), pages 45-70, June.
    4. Eisner, Robert, 1989. "The Total Incomes System of Accounts," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226196381, March.
    5. Klevmarken, N Anders & Quigley, John M, 1976. "Age, Experience, Earnings, and Investments in Human Capital," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(1), pages 47-72, February.
    6. Rosen, Sherwin, 1976. "A Theory of Life Earnings," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(4), pages S45-67, August.
    7. Dale Jorgenson & Barbara M. Fraumeni, 1989. "The Accumulation of Human and Nonhuman Capital, 1948-84," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 227-286 National Bureau of Economic Research, Inc.
    8. Haley, William J, 1973. "Human Capital: The Choice Between Investment and Income," American Economic Review, American Economic Association, vol. 63(5), pages 929-44, December.
    9. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 407-37, May.
    10. Theeuwes, J. & Koopmans, C. C. & Van Opstal, R. & Van Reijn, H., 1985. "Estimation of optimal human capital accumulation parameters for The Netherlands," European Economic Review, Elsevier, vol. 29(2), pages 233-257.
    11. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 281.
    12. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 352.
    13. Moreh, J, 1973. "Human Capital: Deterioration and Net Investment," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 19(3), pages 279-302, September.
    14. Layard, Richard, 1973. "Denison and the Contribution of Education to National Income Growth: A Comment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(4), pages 1013-16, July-Aug..
    15. Polachek,Solomon W. & Siebert,W. Stanley, 1993. "The Economics of Earnings," Cambridge Books, Cambridge University Press, number 9780521367288, 9.
    16. Eisner, Robert, 1988. "Extended Accounts for National Income and Product," Journal of Economic Literature, American Economic Association, vol. 26(4), pages 1611-84, December.
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    Cited by:
    1. Bálint BALOGH, 2013. "How To Measure Human Capital: A Short Review," Network Intelligence Studies, Fundația Română pentru Inteligența Afacerii, Editorial Department, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 1, pages 21-36, July.
    2. Nevine Mokhtar Eid, 2008. "The Capital Asset Pricing Model: An Application on the Efficiency of Financing Higher Public Education in Egypt," Working Papers, The German University in Cairo, Faculty of Management Technology 8, The German University in Cairo, Faculty of Management Technology.
    3. Trinh Le & John Gibson & Les Oxley, 2005. "Measures of human capital: A review of the literature," Treasury Working Paper Series 05/10, New Zealand Treasury.
    4. repec:cmj:networ:y:2013:i:1:p:12-25 is not listed on IDEAS

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