On Valuing Human Capital And Relating it to Macro-Economic Conditions
50 Pages Posted: 31 Dec 2013 Last revised: 19 Jul 2016
Date Written: July 17, 2016
Human capital is the largest component of aggregate wealth, but its relation to other macroeconomic variables is murky due to the lack of market prices. Valuing human capital using historical costs or expected income is characterized by substantial measurement error. We develop a human capital index using slave prices and relate its dynamics to that of other indicators including equities, GDP, real estate and interest rates. The human capital values are extrapolated from the 19th Century to the modern era. Their evolution has substantial implications for our understanding of the human capital dynamics, with applications to growth and portfolio allocation.
Keywords: Human capital value, economic crisis, inflation, GDP, macroeconomics
JEL Classification: G11, G12, E44, J30
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