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Why and How Should Human Capital be Measured in National Accounts?

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  • Nicolas Canry

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

There is currently a significant divergence in the way in which education expenditure is perceived in economic theory and in national accounting: the former treats it as investment, the latter as consumption. In fact, the accounting framework is still structured around two major production factors (labour and physical capital), whereas human capital appears to be essential if certain current phenomena are to be perceived accurately, notably the resurgence of inequality in certain countries. This paper presents the work undertaken to incorporate human capital into national accounts and explores the two main methods used: that based on costs (inputs) and that based on income (output). We go on to use the inputs method to estimate the savings rate of USA, French and British households when education and health expenditure is transferred to investment. Only the inclusion of health expenditure would enable the USA savings rate to be redressed significantly.

Suggested Citation

  • Nicolas Canry, 2020. "Why and How Should Human Capital be Measured in National Accounts?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-02961989, HAL.
    • Handle: RePEc:hal:cesptp:halshs-02961989
    DOI: 10.24187/ecostat.2020.517t.2023
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