1. Lecture 22. INVESTING IN HUMAN CAPITAL
Economics 1490
THE WORLD ECONOMY:
GROWTH OR STAGNATION?
with
Professor Dale W. Jorgenson
Lecture 22. INVESTING IN HUMAN CAPITAL
November 14, 2017
Harvard University Department of Economics
Fall 2017

2. THE WORLD ECONOMY:
GROWTH OR STAGNATION?
A. Comparing Economies
B. U.S. Crisis and Recovery
C. European Slowdown
D. Asian Economic Miracles
E. Sustainability of Economic Growth
F. World Economic Outlook

3. E. SUSTAINABILITY OF ECONOMIC GROWTH
21. Demographic Projections 
22. Investing in Human Capital
23. Fiscal Sustainability
24. Environmental Sustainability
25. Ending Extreme Poverty 

4. SUPPLEMENTARY READINGS
Michael S. Christian (2017), “Net Investment and Stocks of Human Capital in the United States, ,” International Productivity Monitor, No. 33, Fall 2017, pp
Gang Liu (2014), “Measuring the Stock of Human Capital for International and Intertemporal Comparisons,” Ch. 15 in Dale W. Jorgenson, J. Steven Landefeld, and Paul Schreyer, eds., Measuring Economic Stability and Progress, Chicago, University of Chicago Press, pp
Dale W. Jorgenson, Mun S. Ho, and Kevin J. Stiroh (2005), Information Technology and the American Growth Resurgence, Cambridge, The MIT Press, Ch. 6, pp

5. THE CONCEPT OF HUMAN CAPITAL
Investment in Physical Capital vs. Investment in Human Beings
Human Wealth vs. Nonhuman Wealth
Market and Nonmarket Labor Incomes
Lifetime Labor Incomes and Asset Values

6. IS HUMAN CAPITAL IMPORTANT?
Nonmarket Compensation Includes Leisure Time, Household Production, Investment in Education and Investment in Child-Rearing
Nonmarket Labor Compensation is Four Times the Value of Market Compensation
The Value of Human Investment Is Four Times the Value of Nonhuman Investment
Human Wealth is Ten Times the Value of Nonhuman Wealth
Source: Jorgenson and Fraumeni (1989, 1992)

7. RELATIONSHIPS TO THE LITERATURE
MEASURING CAPITAL: Canberra II and Schreyer's OECD Manual (2009), Approved by the United Nations Statistical Commission (2007).
INVESTMENT IN EDUCATION: Jorgenson and Fraumeni (1992).
INVESTMENT IN HEALTH: Cutler and Richardson (1997), Cutler, Rosen, and Vijan (2006).
THE PIONEERS: Machlup (1962), Nordhaus and Tobin (1972), Schultz (1961), and Kendrick (1976).

8. MEASURING HUMAN CAPITAL
The Starting Point: Population
Market Labor Data Base: Employment, Hours, and Market Compensation
Nonmarket Labor Data Base: Population, Hours, and Imputed Compensation
Time Use Surveys
Separation into Quantity (Hours) and Price (Wages Plus Fringe Payments) Components

9. INVESTMENT IN HUMAN CAPITAL
Lifetime Incomes for All Individuals Born in That Year Plus:
Lifetime Incomes for All Immigrants Plus:
Labor Compensation for Formal Schooling (Investment in Education)
Each of These Can Be Separated Into Quantity (Number of Individuals) and Price Components

10. WEALTH BY DEVELOPMENT LEVEL

11. GROWTH RATES IN HUMAN CAPITAL

12. WEALTH BY REGIONS

13. MALE SHARE OF HUMAN CAPITAL

14. HUMAN CAPITAL BY GENDER

15. HUMAN CAPITAL AND GDP

16. STOCK OF HUMAN CAPITAL

17. DISTRIBUTION OF HUMAN CAPITAL BY GENDER IN 2006
Note: Estimates for Australia refer to 2001, those for Denmark to 2002.
Source: OECD human capital project.

18. DISTRIBUTION OF HUMAN CAPITAL BY EDUCATION LEVEL IN 2006
Note: Estimates for Australia refer to 2001, those for Denmark to 2002.
Source: OECD human capital project.

19. DISTRIBUTION OF HUMAN CAPITAL BY AGE GROUP IN 2006
Note: Estimates for Australia refer to 2001, those for Denmark to 2002.
Source: OECD human capital project.

20. DECOMPOSITION OF HUMAN CAPITAL VOLUMES

21. MEASURING HUMAN CAPITAL: SUMMARY
MEASURING CAPITAL: The Same Principles Apply to Human and Nonhuman Capital. These Were Approved by the United Nations Statistical Commission in 2007.
NONMARKET ACCOUNTS: Leisure Time, Household Production, Investment in Education and Child-Rearing, and Additions to the Population Require Nonmarket Accounts.
STRUCTURE OF THE ACCOUNTS: Human Capital Appears in All Parts of the National Accounts; the Structure Remains the Same.

22. MEASURING LABOR INPUT
Labor Input is the Flow of the Services of Human Capital into the Labor Market
The Starting Point: Employed Labor Force
Employment, Hours Worked and Market Labor Compensation
Separation into Quantity (Hours) and Price (Wages Plus Fringe Payments) Components

24. INCORPORATING HUMAN CAPITAL INTO THE MEASUREMENT OF LABOR
Hours Worked and Labor Compensation Are Cross-Classified by Age, Gender, Education, and Class of Worker.
The Growth Rate of Labor Input Is a Weighted Average of the Growth Rates of the Hours Worked by Each Type of Labor
The Weights Are the Shares of Each Type of Labor in Total Labor Compensation
Hours Worked Refers to an Unweighted Sum of Hours Worked by All Types of Labor Input

25. CLASSIFICATION OF CIVILIAN LABOR FORCE

26. LABOR QUANTITY AND PRICE
Growth Rate of Labor Input
Labor Compensation Weights
Two-Period Average Value Shares
Price of Labor Input

27. LABOR QUALITY AND ITS DECOMPOSITION
Labor Quality is the Ratio of Labor Input to Hours Worked.
Decomposition of Labor Quality
Labor Input Sub-Indexes

28. AGGREGATE QUALITY AND FIRST ORDER APPROXIMATION

29. LABOR VOLUME VS. EDUCATION ALONE

30. DISTRIBUTION OF EDUCATION ATTAINMENT

31. COMPENSATION BY EDUCATION ATTAINMENT

32. LABOR INPUT AND HUMAN CAPITAL: SUMMARY
Measuring Investment in Human Capital
Measuring Labor Input
Labor Quantity and Price
Labor Quality and Its Decomposition
Increased Educational Attainment is the Primary Source of Labor Quality Growth