04 Human capital. Productivity measurement.

Question 1

Human capital characteristic

Answer 1

• A productive input : Increased HC −→ increased output.
• Can be produced (as opposed to e.g. natural resources)
• Its value depreciates over time.
• Yields a return, e.g. investment in education increases the wage.
• Cannot be rented, as opposed to physical capital.

Question 2

Relationship between health and income

Answer 2

Two-way causality:

Question 3

Returns to schooling

Answer 3

Hall and Jones (1999). 13.4% per year for years 1-4, 10.1% for next 4 years, 6.8% for 8+ year. (Both developing and developed countries.)

Question 4

We know that capital’s share of income is around ___

Answer 4

We know that capital’s share of income is around 1/3

Question 5

Solow model with HC:

Y =

Answer 5

Y = AK^α(hL)^1−α
= h^1−αAK^αL^1−α

where h is effort/quality per worker

Question 6

In our Solow model, income per capita is ____ to HC.

Answer 6

In our Solow model, income per capita is proportional to HC.

Question 7

Where do A differences come from?

Answer 7

Maybe we are capturing differences in

• 􏰀the quality of capital.
• 􏰀unobserved worker differences.
• 􏰀other factors of production.

Question 8

Growth accounting

Answer 8

Production function again

y = Ak^αh^1−α

Growth rates:

yˆ = Aˆ + αkˆ + (1 − α)hˆ
Aˆ = yˆ − αkˆ − (1 − α)hˆ

Productivity growth = output growth - growth in inputs.

Question 9

^(xy) =

Answer 9

Question 10

Following countries over time, does factor accumlation (FA) or productivity explain growth?

Answer 10

Appears that ^A is more important - more variation in ^A than ^(FA).