Revisiting human capital and aggregate income differences

We revisit human capital and development accounting. In quantifying human capital, we split it into three components; schooling (years of education), cognitive skills (as proxied by test score results), and a health indicator (for which adult survival rates are used). Our calculations are reported f...

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Bibliographic Details
Published in:Economic modelling 2020-09, Vol.91, p.43-64
Main Authors: Campbell, Susanna G., Üngör, Murat
Format: Article
Language:English
Subjects:
Cognitive skills
Development accounting
Health
Human capital
Schooling
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Summary:We revisit human capital and development accounting. In quantifying human capital, we split it into three components; schooling (years of education), cognitive skills (as proxied by test score results), and a health indicator (for which adult survival rates are used). Our calculations are reported for a substantive cross-section of countries for the year 2000. According to our most conservative estimates, the most complete measure of human capital accounts for 19–28% of differences in output per worker across countries, but when excluding the health component this value falls to 17–22%, and further to 13–14% when only considering schooling. We present group comparisons, finding for some regions values as large as 40–50%. •We revisit human capital and development accounting.•We extend the human capital to account for schooling, cognitive skills, and health.•For some regions, the main culprit is differences in human capital.•We provide preliminary evidence on the importance of including a health component.
ISSN:0264-9993
1873-6122
DOI:10.1016/j.econmod.2020.05.016