ERIC Number: ED102661
Record Type: RIE
Publication Date: 1973
Reference Count: N/A
Human Capital and the Internal Rate of Return.
The theory of human capital has made a significant impact on the practice of modern labor economics. At a broad and general level, the concept of human capital has obvious appeal for its simplicity, analytical power, and relationship to economic theory. The fundamental problem in labor economics is the determination of wage rates and earnings; human capital is first and foremost a theory of lifetime earnings determination. Much of the theoretical and empirical literature on the subject has focused on the rate of return. However, rates of return provide very little information about the empirical consequences of human capital constructs because very few restrictions are used in the computations. The time has come to focus instead on the entire life-earnings function. Earnings are a directly observable consequence of the theory, whereas rates of return are synthetic constructs that have few desirable properties. By concentrating on directly observable earnings, it is possible to spell out what can and cannot be estimated from the data and how these estimates relate to maintained assumptions. (Author/JG)
Descriptors: Conceptual Schemes, Economic Research, Economics, Educational Economics, Human Capital, Human Resources, Income, Investment, Labor Economics, Socioeconomic Status
Industrial Relations Research Association, 2211 Parmenter, Middleton, Madison, Wisconsin
Publication Type: Speeches/Meeting Papers
Education Level: N/A
Sponsor: National Inst. of Education (DHEW), Washington, DC.
Authoring Institution: N/A
Note: In Proceedings of Industrial Relations Research Association Annual Meeting (26th, New York, New York, December 28-29, 1973), pp. 243-250