Specifying Human Capital: A Review, Some Extensions, and Development Effects

Kiel Working Paper No. 1007

56 Pages Posted: 3 Nov 2000

See all articles by Ludger Woessmann

Ludger Woessmann

Ifo Institute for Economic Research; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); University of Munich - Ifo Institute for Economic Research

Date Written: October 2000

Abstract

A review of the measures of the stock of human capital used in empirical growth research reveals that human capital is mostly poorly proxied. The simple use of the most common proxy, average years of schooling of the working-age population, misspecifies the relationship between education and the stock of human capital. Based on human capital theory, the specification of human capital should be extended to allow for decreasing returns to education and for differences in the quality of a year of education. Cross-country differences in quality-adjusted human capital can account for about half the world-wide dispersion of levels of economic development and for virtually all the development differences across OECD countries.

Keywords: human capital measurement, years of schooling, Mincer specification, educational quality, development accounting

JEL Classification: O4, I2

Suggested Citation

Woessmann, Ludger, Specifying Human Capital: A Review, Some Extensions, and Development Effects (October 2000). Kiel Working Paper No. 1007. Available at SSRN: https://ssrn.com/abstract=246294 or http://dx.doi.org/10.2139/ssrn.246294

Ludger Woessmann (Contact Author)

Ifo Institute for Economic Research ( email )

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Munich
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++49 89 9224 1699 (Phone)
++49 89 9224 1460 (Fax)

HOME PAGE: http://www.cesifo.de/link/woessmann_l.htm

Institute for the Study of Labor (IZA)

P.O. Box 7240
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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

University of Munich - Ifo Institute for Economic Research

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Munich, 80539
Germany

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