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

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

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

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

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

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

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 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

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)

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

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

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%

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

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

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

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

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

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 1985-2007 2.35 .78 1.57 1985-1995 2.42 .49 1.93 1995-2007 2.28 1.02 1.27

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

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?

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?

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!