Measuring Human Capital

Katharine Abraham and Justine Mallatt

Journal of Economic Perspectives, 2022, vol. 36, issue 3, 103-30

Abstract: We review the existing literature on the measurement of human capital. Broadly speaking, economists have proposed three approaches to constructing human capital measures—the indicator approach, the cost approach, and the income approach. Studies employing the indicator approach have used single measures such as average years of schooling or indexes of multiple measures. The cost approach values human capital investments based on spending. The income approach values human capital investments by looking forward to the increment to expected future earnings they produce. The latter two approaches have the significant advantage of consistency with national income accounting practices and measures of other types of capital. Measures based on the income approach typically yield far larger estimates of the value of human capital than measures based on the cost approach. We outline possible reasons for this discrepancy and show how changes in assumptions can reconcile estimates based on the two approaches.

JEL-codes: C43 E22 E24 I26 J24 M53 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Working Paper: Measuring Human Capital (2022)
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DOI: 10.1257/jep.36.3.103

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