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The Money Value of a Man

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Abstract

This paper posits a notion of the value of an individual’s human capital and the associated return on human capital. These concepts are examined using U.S. data on male earnings and financial asset returns. We decompose the value of human capital into a bond, a stock and a residual value component. We find that (1) the bond component of human capital is larger than the stock component at all ages, (2) the value of human capital is far below the value implied by discounting earnings at the risk-free rate, (3) mean human capital returns exceed stock returns early in life and decline with age and (4) human capital returns and stock returns have a small positive correlation over the working lifetime.

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Bibliographic Info

Paper provided by Georgetown University, Department of Economics in its series Working Papers with number gueconwpa~12-12-02.

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Date of creation: 02 Jan 2012
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Handle: RePEc:geo:guwopa:gueconwpa~12-12-02

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Postal: Georgetown University Department of Economics Washington, DC 20057-1036
Phone: 202-687-6074
Fax: 202-687-6102
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Web page: http://econ.georgetown.edu/

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Postal: Marcia Suss Administrative Officer Georgetown University Department of Economics Washington, DC 20057-1036
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Web: http://econ.georgetown.edu/

Related research

Keywords: Value of Human Capital; Return on Human Capital; Asset Pricing; Idiosyncratic and Aggregate Risk JEL Classification: D91; E21; G12; J24;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The value of human capital
    by Economic Logician in Economic Logic on 2012-06-01 14:10:00
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Cited by:
  1. Benzoni, Luca & Chyruk, Olena, 2013. "Human Capital and Long-Run Labor Income Risk," Working Paper Series WP-2013-16, Federal Reserve Bank of Chicago.

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