Measuring Human Capital

We review the existing literature on measurement of human capital. Broadly speaking, economists have proposed three approaches to constructing capital measures—the indicator approach, cost and income approach. Studies employing approach used single measures such as average years schooling or indexes multiple measures. The values investments based spending. by looking forward increment expected future earnings they produce. latter two significant advantage consistency with national accounting practices other types Measures typically yield far larger estimates value than outline possible reasons for this discrepancy show how changes in assumptions can reconcile approaches.