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Specifying Human Capital: A Review, Some Extensions, and Development Effects

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  • Wößmann, Ludger

Abstract

A review of the measures of the stock of human capital used in empirical growth research reveals that human capital is mostly poorly proxied. The simple use of the most common proxy, average years of schooling of the working-age population, misspecifies the relationship between education and the stock of human capital. Based on human capital theory, the specification of human capital should be extended to allow for decreasing returns to education and for differences in the quality of a year of education. Cross-country differences in qualityadjusted human capital can account for about half the world-wide dispersion of levels of economic development and for virtually all the development differences across OECD countries.

Suggested Citation

  • Wößmann, Ludger, 2000. "Specifying Human Capital: A Review, Some Extensions, and Development Effects," Kiel Working Papers 1007, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkwp:1007
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    2. Simeonova-Ganeva, Ralitsa, 2005. "Human Capital Formation during Communism and Transition: Evidence from Bulgaria," MPRA Paper 34231, University Library of Munich, Germany, revised 19 Oct 2011.

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    More about this item

    Keywords

    human capital measurement; years of schooling; Mincer specification; educational quality; development accounting;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • I2 - Health, Education, and Welfare - - Education

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