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An Alternative Measure of Human Capital Stock

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

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.

Suggested Citation

  • Tao, Hung-Lin & Stinson, Thomas F., 1997. "An Alternative Measure of Human Capital Stock," Bulletins 7466, University of Minnesota, Economic Development Center.
    • Handle: RePEc:ags:umedbu:7466
    DOI: 10.22004/ag.econ.7466
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    References listed on IDEAS

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    Cited by:

    1. Les OXxley & Ttrinh Le & John Gibson, 2008. "Measuring Human Capital: Alternative Methods and International Evidence," Korean Economic Review, Korean Economic Association, vol. 24, pages 283-344.
    2. Trinh Le & John Gibson & Les Oxley, 2003. "Cost‐ and Income‐based Measures of Human Capital," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 271-307, July.
    3. repec:cmj:networ:y:2013:i:1:p:12-25 is not listed on IDEAS
    4. Hung-Lin Tao, 2006. "The Demand for Higher Education and a Test of the Extreme Screening Hypothesis," Education Economics, Taylor & Francis Journals, vol. 14(1), pages 75-88.
    5. Bálint BALOGH, 2013. "How To Measure Human Capital: A Short Review," Network Intelligence Studies, Romanian Foundation for Business Intelligence, Editorial Department, issue 1, pages 21-36, July.
    6. Nevine Mokhtar Eid, 2008. "The Capital Asset Pricing Model: An Application on the Efficiency of Financing Higher Public Education in Egypt," Working Papers 8, The German University in Cairo, Faculty of Management Technology.
    7. Chiappero-Martinetti, Enrica & Sabadash, Anna, 2014. "Integrating Human Capital and Human Capabilities in Understanding the Value of Education," MPRA Paper 61800, University Library of Munich, Germany.
    8. 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.

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    Keywords

    Labor and Human Capital;

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