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Barbara M. Fraumeni Muskie School of Public Service, USM, Portland, ME, USA & the National Bureau of Economic Research, USA World KLEMS, Methodology, Session.

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Presentation on theme: "Barbara M. Fraumeni Muskie School of Public Service, USM, Portland, ME, USA & the National Bureau of Economic Research, USA World KLEMS, Methodology, Session."— Presentation transcript:

1 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 International Implementation of Jorgenson-Fraumeni Human Capital Accounts Muskie School of Public Service Ph.D. Program in Public Policy

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

3 3 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 4 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 Muskie School of Public Service Ph.D. Program in Public Policy

5 5 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

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 7 OECD Consortium IARIW Progress Report by Liu Market only Ages –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 Muskie School of Public Service Ph.D. Program in Public Policy

8 8 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

9 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

10 10 IARIW OECD Report by Liu Human Capital per Capita (Thous. of US$s) 2006 Muskie School of Public Service Ph.D. Program in Public Policy

11 11 IARIW Human Capital in China Paper Li, Liang, Fraumeni, Liu, and Wang Ages –Males –Females 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

12 12 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

13 13 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

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

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

16 16 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 Muskie School of Public Service Ph.D. Program in Public Policy

17 17 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 Capita Population

18 18 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 Muskie School of Public Service Ph.D. Program in Public Policy

19 19 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

20 20 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

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


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