The Value and Risk of Human Capital

34 Pages Posted: 20 Aug 2015

See all articles by Luca Benzoni

Luca Benzoni

Federal Reserve Bank of Chicago - Research Department

Olena Chyruk

Federal Reserve Bank of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: 2015-07-20

Abstract

Human capital embodies the knowledge, skills, health and values that contribute to making people productive. These qualities, however, are hard to measure, and quantitative studies of human capital are typically based on the valuation of the lifetime income that a person generates in the labor market. This article surveys the theoretical and empirical literature that models a worker's life-cycle earnings and identifies appropriate discount rates to translate those cash flows into a certainty equivalent of wealth. This paper begins with an overview of a stylized model of human capital valuation with exogenous labor income. The authors then discuss extensions to this framework that study the underlying economic sources of labor income shocks, the choices, such as work, leisure, retirement and investment in education, that people make over their life and their implications for human capital valuation and risk.

Keywords: human capital, labor income, employment

JEL Classification: G10, G12, J22, J24, J26, J31

Suggested Citation

Benzoni, Luca and Chyruk, Olena, The Value and Risk of Human Capital (2015-07-20). FRB of Chicago Working Paper No. 2015-06. Available at SSRN: https://ssrn.com/abstract=2647279 or http://dx.doi.org/10.2139/ssrn.2647279

Luca Benzoni (Contact Author)

Federal Reserve Bank of Chicago - Research Department ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312-322-8499 (Phone)

HOME PAGE: http://lbenzoni.frbchi.googlepages.com/

Olena Chyruk

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

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