Working Paper: NBER ID: w16895
Authors: Barbara M. Fraumeni
Abstract: Both human capital and nonhuman capital play an important role in economic growth. Estimates of nonhuman (physical) capital exist for many more countries than for human capital. Recently there has been a significant increase in the number of countries for which estimates of human capital exist, primarily because of the OECD human capital project, which has constructed nominal Jorgenson-Fraumeni human capital stocks for eleven countries. \n \nAs the OECD project continues, it is important to reflect on the rates used in this project and in other efforts. Although two real rates need to be chosen: a discount rate and a rate of growth of labor income, what really matters is the size of the adjustment factor which incorporates both rates. \n \nIn order to best understand the role of human capital in economic growth, volume (quantity) indices need to be constructed. This paper outlines how total and partial indices can be constructed, which along which companion contributions, will allow for more informative and detailed cross-country and individual country analyses.
Keywords: Human Capital; Economic Growth; Volume Indices
JEL Codes: J24; O15; O47; O53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| choice of discount and income growth rates (D15) | size of human capital estimates (J24) |
| adjustment factor (incorporating discount and growth rates) (H43) | size of human capital estimates (J24) |
| volume-based contribution and decomposition indices (C43) | contributions of human capital to economic growth (J24) |
| human capital investments (J24) | economic output (E23) |