A New Perspective
INTRODUCTION: THE SCOPE OF HUMAN CAPITAL THEORY The economics of human resources oﬀers explanations of individual and group (household) behaviour over the life-cycle. It provides a common analytical framework for apparently diverse issues such as: 1. Labour market behaviour, as reﬂected in job choice, training and retraining, wage determination, and age–earnings proﬁles, as well as job search and mobility (both domestically and internationally – brain drain), together with fringe beneﬁts and employment contracts. Compulsory schooling and voluntary education, as well as health care and retirement. Income distribution and poverty. Family decisions, including marriage (a search process) and the choice of the number of children. Technical progress. Research and development leading to innovation involves the creation and dissemination (or the protection via patents) of the valuable information and knowledge which is initially embodied in human beings (for example, scientists). Economic growth. Investment in human capital through formal education, training and on-the-job experience contributes to economic growth in both developed and developing nations. Human capital also contributes to growth through innovation resulting from the training of scientists, technologists and potential innovators (the knowledge-based economy). The Solow growth model found that a substantial part of US growth was not accounted for by inputs of capital and labour. This Solow residual was assumed to be caused by technical progress resulting from innovation (although other factors such as the business environment were also found to be important). 2. 3. 4. 5. 6. The common characteristic of these activities is that they...
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