Kiel Working Papers, Kiel Institute for World Economics
No 1007:
Specifying Human Capital: A Review, Some Extensions, and Development Effects
Ludger Wößmann
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; (follow links to similar papers)
JEL-Codes: O4; I2; (follow links to similar papers)
October 2000
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