How Large is the Stock Component of Human Capital?

Mark Huggett and Greg Kaplan

Review of Economic Dynamics, 2016, vol. 22, 21-51

Abstract: This paper examines the value of an individual's human capital and the associated return on human capital using U.S. data on male earnings and financial asset returns. We measure the size of the stock component of human capital and assess the implications for life-cycle portfolio decisions. We find that (1) the value of human capital is far below the value implied by discounting earnings at the risk-free rate and (2) the stock component of the value of human capital is smaller than the bond component at all ages and typically averages less than 35 percent of the value of human capital. Data properties that increase the stock component of the value of human capital also act to lower the stock share held in financial wealth. (Copyright: Elsevier)

Keywords: Value of human capital; Idiosyncratic and aggregate risk; Incomplete markets (search for similar items in EconPapers)
JEL-codes: D91 E21 G12 J24 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (33)

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Working Paper: How Large is the Stock Component of Human Capital? (2015)
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DOI: 10.1016/j.red.2016.06.002

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