Four Facts about Human Capital

Abstract

This paper synthesizes what economists have learned about human capital since Becker (1962) into four stylized facts. First, human capital explains at least one-third of the variation in labor earnings within countries and at least half of the variation across countries. Second, human capital investments have high economic returns throughout childhood and young adulthood. Third, we know how to build foundational skills such as literacy and numeracy, and resources are often the main constraint. Fourth, higher-order skills such as problem-solving and teamwork are increasingly valuable, and the technology for producing these skills is not well understood. We know that investment in education works and that skills matter for earnings, but we do not always know why.

Wage heterogeneity in the graduate market: Industry and public-private differences in Chile

“…An emergent problem related to the increasing production of a highly educated workforce supported by PFCHA is the non-organic evolution of the graduate job market. Indeed, increasing the number of people holding master's and doctoral degrees represents an edge for economic development literature (Deming, 2022). However, the complexity of the Chilean economy has not increased at the same pace.…”

“…Whether the economics perspective could represent a sound rationality behind individual decision-making and the engagement in lifelong learning career strategies, the mentioned perspectives present at least three kinds of issues in describing the problem of continuing education: first, those perspectives have faced significant problems in adjusting to the socio-historical phenomena of educational expansion. While the stylized facts regarding human capital acquisition have shown a strong and stable connection between education and labor market outcomes (e.g., employment or wages) (Deming, 2022), the expansion of educational systems has produced a set of coordination problems between employers and employees summarized in the ideas of educational or skill mismatch (Duncan & Hoffman, 1981; Park & Shahiri, 2019). Second, the connection between educational attainment and wage distribution has been subject to critical examination, questioning if the base of human capital valuation comes from the scarcity/demand relationship as in the case of the positional goods approach (Di Stasio et al, 2016) or if that valuation is grounded in the institutional and extra-institutional domains for educational credentials as in the educational credentialism approach (Brown & Bills, 2011).…”

Exploring the Multidimensional Determinants of Local Economic Development in Rural Communities in Ghana: A Comparative Analysis

“…Several scholarly investigations have provided empirical evidence supporting a positive association between human capital and economic growth. Deming (2022) found that there is a positive correlation between educational attainment and expertise within communities and the level of productivity and economic development [25]. Moreover, there exists a robust correlation between human capital and various labour market indicators, including rates of employment and levels of remuneration.…”

Cognitive Endurance, Talent Selection, and the Labor Market Returns to Human Capital

“…The human capital framework posits that individuals' skills and knowledge act as a form of capital that improves productivity and, thus, labor earnings (Becker, 1962). The positive relationship between human capital and earnings is one of the most robust findings in the social sciences (Deming, 2022), and is supported by a large body of work (e.g., Mincer, 1958;Griliches, 1977;Card, 1999Card, , 2001. While early studies focused on aggregate measures of human capital-like years of schooling-more recent work has focused on estimating the economic returns to specific skills, such as social skills (Deming, 2017) or cognitive skills (Hermo et al, 2022).…”