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Estimates of Human Capital in Canada: The Lifetime Income Approach

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  • Gu, Wulong Wong, Ambrose

Abstract

This paper produces an estimate of market-based human capital investment and stock for Canada over the period from 1970 to 2007 based on the lifetime income approach and compares it with that of physical and natural capital investment and stock. It adopts the methodology developed by Jorgenson and Fraumeni, and estimates human capital stock as the expected future lifetime income of all individuals. Human capital investment is estimated as changes in human capital stock due to the addition of new members of the working age population arising from the rearing and education of children and the effect of immigration on human capital. The main findings are as follows: 1. The volume of aggregate human capital rose at an annual rate of 1.7% in Canada for the period 1970 to 2007, and most of the growth is due to the increase in the number of individuals in the working-age population. The rising education level of the Canadian population is also a significant contributing factor to the growth in human capital. 2. The compositional effects of aging of the Canadian population (a movement to a population that is older on average) reduced human capital growth by 0.6% per year over the period 1980 to 2007, while the rising education level increased human capital growth by 0.7% per year over the period. 3. Human capital stock on a per capita basis increased at 0.9% per year for the period 1970 to 1980, due to the rising education attainment during the period. After 1980, human capital stock per capita was virtually unchanged due to two offsetting factors: rising education level which increased human capital stock and the compositional effects of population aging, which reduced human capital stock. 4. The value of human capital investment and stock exceeds the value of physical capital investment and stock, and the ratio of human capital investment and stock to physical capital investment and stock declined over time. In 2007, human capital stock is about four times

Suggested Citation

  • Gu, Wulong Wong, Ambrose, 2010. "Estimates of Human Capital in Canada: The Lifetime Income Approach," Economic Analysis (EA) Research Paper Series 2010062e, Statistics Canada, Analytical Studies Branch.
    • Handle: RePEc:stc:stcp5e:2010062e
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    Citations

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    Cited by:

    1. Augustin de Coulon & Larissa da Silva Marioni & Mary O'Mahony, 2022. "Transition Probabilities, Wages and Regional Human Capital Stocks," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2022-28, Economic Statistics Centre of Excellence (ESCoE).
    2. Michael S. Christian, 2014. "Human Capital Accounting in the United States: Context, Measurement, and Application," NBER Chapters, in: Measuring Economic Sustainability and Progress, pages 461-491, National Bureau of Economic Research, Inc.
    3. Michael S. Christian, 2017. "Net Investment and Stocks of Human Capital in the United States, 1975-2013," International Productivity Monitor, Centre for the Study of Living Standards, vol. 33, pages 128-149, Fall.
    4. Wulong Gu & Ambrose Wong, 2015. "Productivity and economic output of the education sector," Journal of Productivity Analysis, Springer, vol. 43(2), pages 165-182, April.
    5. Gang Liu, 2015. "A stylized satellite account for human capital," Discussion Papers 816, Statistics Norway, Research Department.
    6. Laverde, Henry, 2015. "Analysis of human capital by means of a prospective method: A study for Latin America," MPRA Paper 81633, University Library of Munich, Germany, revised Jul 2017.
    7. Michael S. Christian, 2011. "Human Capital Accounting in the United States: Context, Measurement, and Application," BEA Working Papers 0073, Bureau of Economic Analysis.

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    Keywords

    Economic accounts; Financial and wealth accounts;

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