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Muskie School of Public Service. Ph.D. Program in Public Policy. International Implementation of Jorgenson-Fraumeni Human Capital Accounts. Barbara M. Fraumeni Muskie School of Public Service, USM, Portland, ME, USA & the National Bureau of Economic Research, USA - PowerPoint PPT Presentation
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Barbara M. FraumeniMuskie School of Public Service, USM, Portland, ME, USA
& the National Bureau of Economic Research, USA
World KLEMS, Methodology, Session 1: Labor InputHarvard University, Cambridge, MA, August 19, 2010
International Implementation ofJorgenson-Fraumeni Human Capital Accounts
Muskie School of Public Service Ph.D. Program in Public Policy
• J-F: the Model
• International efforts– OECD human capital consortium– China
• Extensions & improvements
Muskie School of Public Service Ph.D. Program in Public Policy
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Human Capital as Capital
• Seminal: Becker (1964), Mincer (1974), Schultz (1961)
• More recent– Economic sustainability and well-being
• “Stiglitz” Commission: Commission on Economic Performance and Social Progress
– World Bank Wealth Report
Muskie School of Public Service Ph.D. Program in Public Policy
4
Theoretical BasisJorgenson-Fraumeni
• Neoclassical theory of investment (Jorgenson)
• Investment amount as the price you would pay for a business machine that would help you earn future income
Muskie School of Public Service Ph.D. Program in Public Policy
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Jorgenson-Fraumeni
• Lifetime income projections
• Depend upon education, age, and survival as well as income earned
• Present discounted values adjusted for future expected income changes with contemporaneous information
Muskie School of Public Service Ph.D. Program in Public Policy
OECD Human Capital ConsortiumJorgenson-Fraumeni
Australia, Canada, Denmark, France, Italy, Japan, Korea, Mexico, Netherlands,
Norway, New Zealand, Poland, Romania, Russia, Spain, UK, US, EC (Eurostat), International Labour Organization,
• Other countries who have already done J-F
China, Sweden
7
OECD Consortium IARIW Progress Report by Liu
• Market only• Ages 15-64
– Ages 15-40 study & work– Ages 41-64 work only
• Data on employment for 5-year age groups• Data on school enrollment by single year of
age through age 29, 5-year age groups there-after
Muskie School of Public Service Ph.D. Program in Public Policy
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OECD Consortium IARIW Progress Report by Liu
• Discount rate of 4.58% and a real income rate growth rate of 1.32% following J-F (1992, Griliches volume)
• Simplified methodology as suggested by Fraumeni (2008)
Muskie School of Public Service Ph.D. Program in Public Policy
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IARIW OECD Report by LiuNominal Ratio of Human Capital to GDP,
2006
Muskie School of Public Service Ph.D. Program in Public Policy
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IARIW OECD Report by LiuHuman Capital per Capita (Thous. of US$s)
2006
Muskie School of Public Service Ph.D. Program in Public Policy
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IARIW Human Capital in China PaperLi, Liang, Fraumeni, Liu, and Wang
• Ages – Males 16-60– Females 16-55
• For comparison purposes same real income growth rate and discount rate
• Base case income growth rates– Urban 6.00%– Rural 4.11%
Muskie School of Public Service Ph.D. Program in Public Policy
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IARIW Human Capital in China Paper
• Mincer equation to estimate income
• Modification of contemporaneous enrollment information
Muskie School of Public Service Ph.D. Program in Public Policy
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IARIW Human Capital in China Paper Educational Attainment by Gender
1982 vs. 2007, Millions
Muskie School of Public Service Ph.D. Program in Public Policy
0
100
200
300
400
500
no school i ng pri maryschool
j uni or mi ddl eschool
seni or mi ddl eschool
col l ege andover
millions
mal e f emal e total
0
100
200
300
400
500
no schooling primary school junior middleschool
senior middleschool
college and over
mil
lio
ns
male female total
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IARIW Human Capital in China Paper Real Human Capital (trillions of 1985 RMB)
Muskie School of Public Service Ph.D. Program in Public Policy
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IARIW Human Capital in China Paper Nominal Human Capital (trillions of RMB)
Muskie School of Public Service Ph.D. Program in Public Policy
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IARIW Human Capital in China Paper2006 Comparison
Nominal ratio of human capital to GDP
is 5.1
below the OECD consortium country range
of
6.9 to 11.7
Muskie School of Public Service Ph.D. Program in Public Policy
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IARIW Human Capital in China Paper
Muskie School of Public Service Ph.D. Program in Public Policy
% Rate of Growth of
Real Measures
Total Human Capital
Human Capital per
CapitaPopulation
1985-2007 2.35 .78 1.57
1985-1995 2.42 .49 1.93
1995-2007 2.28 1.02 1.27
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Next Release: Provincial Human Capital Center for Human Capital and Labor Market Research
of theCentral University for Finance and Economics,
Beijing, China & Hunan University students
• Beijing• Gansu• Guangdong• Hunan• Jiangsu• Liaoning
Muskie School of Public Service Ph.D. Program in Public Policy
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What Next for the OECD project?
• Divisia quantity indexes
• Will the nonmarket sector be added?
• Will other countries become involved at a later date?
Muskie School of Public Service Ph.D. Program in Public Policy
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Importance of Nonmarket Activities
• 60-70% of the value of all activities comes from nonmarket activities (J-F)
• Given the hours worked for pay of all hours available in a week, this is not too surprising
• How could we survive without nonmarket activities?
Muskie School of Public Service Ph.D. Program in Public Policy
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Jorgenson-Fraumeni Mark 2
No decisions, but we’ll be back!
Muskie School of Public Service Ph.D. Program in Public Policy