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The Money Value of a Man

  • Mark Huggett

    ()

    (Department of Economics, Georgetown University)

  • Greg Kaplan

    ()

    (Department of Economics, University of Pennsylvania)

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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File URL: http://economics.sas.upenn.edu/system/files/12-014.pdf
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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-014.

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Length: 55 pages
Date of creation: 03 Apr 2012
Date of revision:
Handle: RePEc:pen:papers:12-014
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  11. Mark Huggett and Greg Kaplan, 2010. "Human Capital Values and Returns:Bounds Implied By Earnings and Asset Returns Data," Working Papers gueconwpa~10-10-02, Georgetown University, Department of Economics.
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