Skip to main content

Human Capital Values and Returns: Bounds Implied By Earnings and Asset Returns Data

Staff Report 448 | Published July 23, 2010

Download PDF

Authors

Human Capital Values and Returns: Bounds Implied By Earnings and Asset Returns Data

Abstract

We provide theory for calculating bounds on both the value of an individual’s human capital and the return on an individual’s human capital, given knowledge of the process governing earnings and financial asset returns. We calculate bounds using U.S. data on male earnings and financial asset returns. The large idiosyncratic component of earnings risk implies that bounds on values and returns are quite loose. However, when aggregate shocks are the only source of earnings risk, both bounds are tight.


Published In: Journal of Economic Theory (Vol. 146, No. 3, May 2011, pp. 897-919) https://doi.org/10.1016/j.jet.2010.09.005

Download Paper (pdf)