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
World KLEMS, Methodology, Session 1: Labor Input
Harvard University, Cambridge, MA, August 19, 2010
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
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
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Muskie School of Public Service
Ph.D. Program in Public Policy
Theoretical Basis
Jorgenson-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
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Muskie School of Public Service
Ph.D. Program in Public Policy
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
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OECD Human Capital Consortium
Jorgenson-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
Muskie School of Public Service
Ph.D. Program in Public Policy
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
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there-after
Muskie School of Public Service
Ph.D. Program in Public Policy
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)
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Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW OECD Report by Liu
Nominal Ratio of Human Capital to GDP,
2006
14
12
10
8
6.9
7.7
10.0
9.6
9.6
9.5
9.4
9.2
9.0
8.4 8.5
11.7
11.1
10.6 10.6
6
4
2
0
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Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW OECD Report by Liu
Human Capital per Capita (Thous. of US$s)
2006
700
643
600
500
382 390 413 436 439
400
457 465 466 485
528 546
343
300
191
200
100
79
0
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Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW Human Capital in China Paper
Li, 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%
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Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW Human Capital in China Paper
• Mincer equation to estimate income
• Modification of contemporaneous
enrollment information
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Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW Human Capital in China Paper
Educational Attainment by Gender
1982 vs. 2007, Millions
500
millions
400
300
200
100
0
no schooling
primary
school
male
junior middle senior middle
school
school
female
college and
over
total
500
400
millions
300
200
100
0
no schooling
primary school
male
female
junior middle
school
total
senior middle
school
college and over
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Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW Human Capital in China Paper
Real Human Capital (trillions of 1985 RMB)
12
10
8
6
4
2
-
Total human capital
Male human capital
Female human capital
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Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW Human Capital in China Paper
Nominal Human Capital (trillions of RMB)
60
50
40
30
20
10
-
Total human capital
Male human capital
Female human capital
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Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW Human Capital in China Paper
2006 Comparison
Nominal ratio of human capital to GDP
is 5.1
below the OECD consortium country range
of
6.9 to 11.7
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Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW Human Capital in China Paper
% Rate of
Growth of
Real
Measures
Total
Human
Capital
Human
Capital per Population
Capita
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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Muskie School of Public Service
Ph.D. Program in Public Policy
Next Release: Provincial Human Capital
Center for Human Capital and Labor Market Research
of the
Central University for Finance and Economics,
Beijing, China & Hunan University students
•
•
•
•
•
•
Beijing
Gansu
Guangdong
Hunan
Jiangsu
Liaoning
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Muskie School of Public Service
Ph.D. Program in Public Policy
What Next for the OECD project?
• Divisia quantity indexes
• Will the nonmarket sector be added?
• Will other countries become involved at a
later date?
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Muskie School of Public Service
Ph.D. Program in Public Policy
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?
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Muskie School of Public Service
Ph.D. Program in Public Policy
Jorgenson-Fraumeni Mark 2
No decisions, but we’ll be back!
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