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

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  • Mark Huggett
  • Greg Kaplan

Abstract

We provide theory for calculating bounds on both the value of an individual’s human capital and the return on an individual’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

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 448.

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Date of creation: 2010
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Handle: RePEc:fip:fedmsr:448

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  1. Mark Huggett & Gustavo Ventura & Amir Yaron, 2007. "Sources of Lifetime Inequality," Working Papers gueconwpa~07-07-04, Georgetown University, Department of Economics.
  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. Meghir, Costas & Pistaferri, Luigi, 2011. "Earnings, Consumption and Life Cycle Choices," Handbook of Labor Economics, Elsevier.
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Cited by:
  1. Mark Huggett & Greg Kaplan, 2012. "The Money Value of a Man," Working Papers 2012-009, Human Capital and Economic Opportunity Working Group.
  2. Corbae, Dean & Marimon, Ramon, 2011. "Introduction to Incompleteness and Uncertainty in Economics," Journal of Economic Theory, Elsevier, vol. 146(3), pages 775-784, May.
  3. New York University & Farzad Saidi, 2011. "Networks, Finance, and Development: Evidence from Hunter-Gatherers," 2011 Meeting Papers 615, Society for Economic Dynamics.
  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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