Accounting for Human Capital Externalities: With an Application to the Nordic Countries
Posted: 28 May 2001
Externalities caused by human capital accumulation have taken up considerable space in theoretical work on economic growth. However, less attention has been paid to this externality in traditional growth accounting exercises. This paper takes up the issue of growth accounting, suggesting a framework for quantifying human-capital externalities and illustrating it empirically using data from the five Nordic countries. Four sources of growth are identified, i.e., capital accumulation, labor force growth, and total factor productivity growth (TFP), where the traditional TFP measure is split into a part explained by human-capital formation and an unexplained part. By doing this I am able to attribute between 12 percent and 33 percent of growth in the Nordic countries to human capital investment.
Keywords: Growth accounting, externalities, human capital, TFP
JEL Classification: O40, O47, H52, I2
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