1. International Implementation of
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

2. Muskie School of Public Service
Ph.D. Program in Public Policy
J-F: the Model
International efforts
OECD human capital consortium
China
Extensions & improvements

3. Human Capital as Capital
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

4. Theoretical Basis Jorgenson-Fraumeni
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

5. 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

6. 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

7. OECD Consortium IARIW Progress Report by Liu
Muskie School of Public Service
Ph.D. Program in Public Policy
OECD Consortium IARIW Progress Report by Liu
Market only
Ages 15-64
Ages study & work
Ages 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

8. OECD Consortium IARIW Progress Report by Liu
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)

9. IARIW OECD Report by Liu Nominal Ratio of Human Capital to GDP, 2006
Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW OECD Report by Liu Nominal Ratio of Human Capital to GDP, 2006

10. 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

11. IARIW Human Capital in China Paper Li, Liang, Fraumeni, Liu, and Wang
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%

12. IARIW Human Capital in China Paper
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

13. 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

14. Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW Human Capital in China Paper Real Human Capital (trillions of 1985 RMB)

15. Muskie School of Public Service
Ph.D. Program in Public Policy
IARIW Human Capital in China Paper Nominal Human Capital (trillions of RMB)

16. IARIW Human Capital in China Paper 2006 Comparison
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

17. IARIW Human Capital in China Paper
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 Capita
Population
2.35
.78
1.57
2.42
.49
1.93
2.28
1.02
1.27

18. 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

19. What Next for the OECD project?
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?

20. Importance of Nonmarket Activities
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?

21. Jorgenson-Fraumeni Mark 2
Muskie School of Public Service
Ph.D. Program in Public Policy
Jorgenson-Fraumeni Mark 2
No decisions, but we’ll be back!