IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

The Money Value of a Man

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: Full text
Download Restriction: None

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

in new window

Date of creation: 02 Jan 2012
Date of revision:
Handle: RePEc:geo:guwopa:gueconwpa~12-12-02
Contact details of provider: Postal: Georgetown University Department of Economics Washington, DC 20057-1036
Phone: 202-687-6074
Fax: 202-687-6102
Web page:

Order Information: Postal: Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036
Web: Email:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Eric French, 2004. "The Labor Supply Response to (Mismeasured but) Predictable Wage Changes," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 602-613, May.
  2. Costas Meghir & Luigi Pistaferri, 2010. "Earnings, consumption and lifecycle choices," IFS Working Papers W10/05, Institute for Fiscal Studies.
  3. Guiso, Luigi & Jappelli, Tullio, 2000. "Household Portfolios in Italy," CEPR Discussion Papers 2549, C.E.P.R. Discussion Papers.
  4. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "The Composition and Draw-down of Wealth in Retirement," NBER Working Papers 17536, National Bureau of Economic Research, Inc.
  5. Fatih Guvenen, 2009. "An Empirical Investigation of Labor Income Processes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 58-79, January.
  6. Svensson, L.E. & Werner, I., 1990. "Nontraded Assets in Incomplete Markets: Pricing and Portfolio Choices," Papers 477, Stockholm - International Economic Studies.
  7. Luca Benzoni & Pierre Collin-Dufresne & Robert S. Goldstein, 2007. "Portfolio Choice over the Life-Cycle when the Stock and Labor Markets Are Cointegrated," Journal of Finance, American Finance Association, vol. 62(5), pages 2123-2167, October.
  8. Constantinides,George & Duffie,Darrel, 1992. "Asset pricing with heterogeneous consumers," Discussion Paper Serie A 381, University of Bonn, Germany.
  9. Fatih Guvenen & Anthony Smith, 2010. "Inferring labor income risk from economic choices: an indirect inference approach," Staff Report 450, Federal Reserve Bank of Minneapolis.
  10. John Y. Campbell & Joao F. Cocco & Francisco J. Gomes & Pascala J. Maenhout, 2000. "Investing Retirement Wealth? A Life-Cycle Model," Harvard Institute of Economic Research Working Papers 1896, Harvard - Institute of Economic Research.
  11. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  12. Mark Huggett & Juan Carols Parra, 2006. "How Well Does the US Social Insurance System Provide Social Insurance?," Working Papers gueconwpa~06-06-11, Georgetown University, Department of Economics.
  13. Mark Huggett, 2010. "Human Capital Values and Returns: Bounds Implied By Earnings and Asset Returns Data," 2010 Meeting Papers 564, Society for Economic Dynamics.
  14. Campbell, John, 1996. "Understanding Risk and Return," Scholarly Articles 3153293, Harvard University Department of Economics.
  15. Ignacio Palacios-Huerta, 2001. "An Empirical Analysis of the Risk Properties of Human Capital Returns," Working Papers 2001-10, Brown University, Department of Economics.
  16. Lynch, Anthony W. & Tan, Sinan, 2011. "Labor income dynamics at business-cycle frequencies: Implications for portfolio choice," Journal of Financial Economics, Elsevier, vol. 101(2), pages 333-359, August.
  17. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  18. Mark Huggett & Gustavo Ventura & Amir Yaron, 2010. "Sources of Lifetime Inequality," Working Papers 2011-020, Human Capital and Economic Opportunity Working Group.
  19. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2009. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967-2006," NBER Working Papers 15483, National Bureau of Economic Research, Inc.
  20. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
  21. Graham, John W & Webb, Roy H, 1979. "Stocks and Depreciation of Human Capital: New Evidence from a Present-Value Perspective," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 25(2), pages 209-24, June.
  22. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2005. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," NBER Working Papers 11544, National Bureau of Economic Research, Inc.
  23. Hanno Lustig & Stijn Van Nieuwerburgh, 2008. "The Returns on Human Capital: Good News on Wall Street is Bad News on Main Street," Review of Financial Studies, Society for Financial Studies, vol. 21(5), pages 2097-2137, September.
  24. Marianne Baxter & Urban J. Jermann, 1995. "The International Diversification Puzzle is Worse Than You Think," NBER Working Papers 5019, National Bureau of Economic Research, Inc.
  25. Alvarez, Fernando & Jermann, Urban J., 2000. "Using Asset Prices to Measure the Cost of Business Cycles," Working Papers 00-1, University of Pennsylvania, Wharton School, Weiss Center.
  26. Kjetil Storesletten & Chris Telmer & Amir Yaron, 1996. "Asset pricing with idiosyncratic risk and overlapping generations," Economics Working Papers 405, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 1999.
  27. Robert H. Haveman & Andrew Bershadker & Jonathan A. Schwabish, 2003. "Human Capital in the United States from 1975 to 2000: Patterns of Growth and Utilization," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number hcus.
  28. Kjetil Storesletten & Chris I. Telmer & Amir Yaron, 2004. "Cyclical Dynamics in Idiosyncratic Labor Market Risk," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 695-717, June.
  29. Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 263-86, April.
  30. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S11-44, August.
  31. Lillard, Lee A, 1977. "Inequality: Earnings vs. Human Wealth," American Economic Review, American Economic Association, vol. 67(2), pages 42-53, March.
  32. Luca Benzoni & Pierre Collin-Dufresne & Robert S. Goldstein, 2007. "Portfolio choice over the life-cycle when the stock and labor markets are cointegrated," Working Paper Series WP-07-11, Federal Reserve Bank of Chicago.
  33. Zvi Bodie & Robert C. Merton & William F. Samuelson, 1992. "Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model," NBER Working Papers 3954, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:geo:guwopa:gueconwpa~12-12-02. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcia Suss)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.