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Human capital has a substantial impact on individual earnings. [2] Research indicates that human capital investments have high economic returns throughout childhood and young adulthood. [2] [3] Companies can invest in human capital; for example, through education and training, improving levels of quality and production. [4]
The Uzawa–Lucas model is an economic model that explains long-term economic growth as consequence of human capital accumulation. Developed by Robert Lucas, Jr., [1] building upon initial contributions by Hirofumi Uzawa, [2] it extends the AK model by a two-sector setup, in which physical and human capital are produced by different technologies.
The Human Capital Index (HCI) is an annual measurement prepared by the World Bank. [1] HCI measures which countries are best in mobilizing their human capital, the economic and professional potential of their citizens. The index measures how much capital each country loses through lack of education and health.
The main components of human capital are health and education, but also parenting, on-the-job training, informal education and migration. Human health is affected by daily well-being, productivity and lifespans. The latter is computed as a proxy for health-related human capital, largely because the options for quantifying the others are limited.
Endogenous growth theory holds that investment in human capital, innovation, and knowledge are significant contributors to economic growth. The theory also focuses on positive externalities and spillover effects of a knowledge-based economy which will lead to economic development. The endogenous growth theory primarily holds that the long run ...
In contrast, many economists today consider "human capital" (skills and education) as the fourth factor of production, with entrepreneurship as a form of human capital. Yet others refer to intellectual capital. More recently, many have begun to see "social capital" as a factor, as contributing to production of goods and services.
Roberto Perotti showed that in accordance with the credit market imperfection approach, developed by Galor and Zeira, inequality is associated with lower level of human capital formation (education, experience, apprenticeship) and higher level of fertility, while lower level of human capital is associated with lower levels of economic growth. [122]
Consequently, labour power may be hired not "because it creates more value than it costs to buy", but simply because it conserves the value of a capital asset which, if this labour did not occur, would decline in value by an even greater amount than the labour cost involved in maintaining its value; or because it is a necessary expense which ...