Working Paper: NBER ID: w30149
Authors: David J. Deming
Abstract: This paper synthesizes what economists have learned about human capital since Becker (1962) into four stylized facts. First, human capital explains at least one-third of the variation in labor earnings within countries and at least half of the variation across countries. Second, human capital investments have high economic returns throughout childhood and young adulthood. Third, we know how to build foundational skills such as literacy and numeracy, and resources are often the main constraint. Fourth, higher-order skills such as problem-solving and teamwork are increasingly valuable, and the technology for producing these skills is not well-understood. We know that investment in education works and that skills matter for earnings, but we do not always know why.
Keywords: human capital; education; labor earnings
JEL Codes: I25; I26; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Human Capital (J24) | Variation in Labor Earnings (within countries) (J31) |
| Human Capital (J24) | Variation in Labor Earnings (across countries) (J31) |
| Ability Bias (J71) | Education-Earnings Relationship (I26) |
| Investments in Human Capital (J24) | Economic Returns (I26) |
| Early Childhood Investments (J13) | Long-term Impacts on Life Outcomes (I24) |
| Skill Investments (J24) | Returns (Heckman Curve) (C29) |
| Education (I29) | Earnings (J31) |