HUMAN CAPITAL INVESTMENT IN HEALTH: A MEASUREMENT FRAMEWORK AND ESTIMATES FOR THE UNITED STATES, 1952–78

Lack of a conceptual basis for measuring human capital investment in health has hampered efforts to expand national accounting systems to include human capital investment. This paper presents a conceptual basis for developing estimates of this health investment, an estimation methodology consistent with the conceptual basis, and preliminary estimates for the United States for 1952-78. While much work remains to be done before comprehensive estimates of investment in health are achieved, it is clear that previous estimates based on answers to the question, “What improves health?” have included some inappropriate expenditures while excluding others that should be included. The conceptual basis presented here leads to a methodology for separating health care costs (not the costs of illness) into maintenance and gross investment. Gross investment can be further separated into net investment and the sum of damages and depreciation but empirical implementation of this step is not attempted here.     

THE ACCOUNTING TREATMENT OF HUMAN INVESTMENT AND CAPITAL

Defining investment as outlays that increase income- and output-producing capacity, the author presents estimates of human investment in the United States 1929–69, comprising rearing costs, education, training, health, safety and mobility outlays. He develops an economic accounting framework to accommodate human investments and research and development in national and sector capital accounts, with appropriate adjustments to the current accounts to provide consistency. The associated balance sheets and wealth statements are also developed.
The wealth and corresponding income estimates are used to compute rates of return on human, non-human, and total capital. In the business economy the average net rate of return on total capital was 10.6 percent in 1969, compared with 10.0 percent in 1929. The average and marginal rates of return on human capital were generally somewhat higher than on non-human capital throughout the period.     

The effects of public infrastructure on the cost structure of Spanish industries

This paper examines the impact of public infrastructures on the performance of Spanish private business at a disaggregated industry level. We use duality theory to recover the productivity effects of public capital by calculating the cost saving effects that are associated to public services. Using a translog cost function we present panel estimates for 14 Spanish industries during the period 1980–1991. Our results strongly suggest that public capital formation can be considered to be an instrument to improve competitiveness by reducing production costs. However, the results also indicate that there is a technologically induced labor saving effect through higher public investment. Furthermore, our estimates suggest that a distinction among industries is of importance because the effects of public infrastructures vary across industries considerably.     

Technological Change in Australian Manufacturing

In the modern era, the extent and character of technical change features prominently in discussions of productivity growth and movements in the competitiveness of manufacturing. While technical change is pervasive in modern manufacturing, it occurs unevenly. In this study, technical change is estimated by fitting dual cost functions for each of 38 sectors of Australian manufacturing over the 32 year period, 1968–69 to 1999–2000. The estimates show that technical change is heavily labour-saving in all industries, but that the overall rate of change, as measured by a rate of cost diminution, and the degree of bias towards saving labour, rather than capital or material, varies substantially across industries.     

THE MEASUREMENT OF U.S. REAL CAPITAL INPUT, 1929–1967

The purpose of this paper is to develop methods for the measurement of real capital input. These methods are based on perpetual inventory estimates of capital stock and corresponding estimates of capital service prices. Stocks and service prices are adjusted for relative utilization of capital. The resulting estimates represent a separation of income from capital into price and quantity components. Estimates of capital input in current and constant prices are constructed for corporate business, non-corporate business, and households and non-profit institutions in the United States for the period 1929–1967. These estimates are prepared in a form suitable for integration into the U.S. National Income and Product Accounts.     

An adjustment cost model of social mobility

We analyze herein the effects of the human capital adjustment cost on social mobility. Such an adjustment cost is modeled as a rising marginal cost schedule for augmenting human capital. We use a general human capital technology, which disentangles the adjustment cost from the depreciation cost of the human capital. Missing credit markets prevent individuals from equalizing the initial differences in the human capital. We find that a higher adjustment cost for human capital acquisition slows down the social mobility and results in a persistent inequality across generations. On the other hand, a higher rate of human capital depreciation could increase mobility via a positive effect on new investment. The quantitative analysis of our model suggests that the human capital adjustment cost is nontrivial to account for the observed persistence of inequality and social mobility. In addition, we find that the government redistribution policy could account for the large observed variation in estimates of social mobility.     

ACCRUED CAPITAL GAINS, PERSONAL INCOME AND SAVING IN THE UNITED STATES, 1948–1964

Capital gains are an important source of personal income in the United States but they are not included in the national accounts or the official estimate of personal income and saving. Individuals report their realized gains for tax purposes but the economic theorist would include both realized and accrued gains in income. National income theorists continue to debate whether capital gains should be included in income but, because of the many conceptual and statistical problems involved in estimating capital gains, no satisfactory estimates have been developed. Consequently, the debate has stayed mainly at the theoretical level. This paper deals with the methodology of estimating accrued capital gains. A simple analytical model is developed to estimate capital gains from data on market value and net acquisitions of an asset but the model can be adapted to incorporate asset prices directly. It is shown that the methods used for estimating accrued gains in the past are special cases of the model proposed in the paper. The model is then used for estimating gains accruing to individuals in the United States on their holdings of corporate stock, real estate and livestock during 1948–1964.
During this period accrued gains have amounted to roughly five times the realized gains reported for tax purposes; corporate stock and real estate are the most important sources of capital gains and corporate stock accounts for almost two-thirds of all accrued gains. The paper goes on to examine the implications of these estimates for the existing series on personal income and saving in the United States. The inclusion of accrued gains would increase the variance in the official estimates but personal saving is affected more than personal income. The paper concludes with an evaluation of these results and some suggestions for further research.     

X-efficiency and economies of scale in pension fund administration and investment

Pension funds’ operating costs impair pension benefits, so it is crucial for pension funds to operate at the lowest cost possible. In practice, we observe substantial differences in costs per member for Dutch pension funds, both across and within pension fund size classes. This article presents new estimates of scale economies of pension funds and is the first that also measures pension fund X-inefficiency. We use a unique supervisory data set which distinguishes between administrative and investment costs and apply various approaches and models. Our estimates show large economies of scale for pension fund administrations, but modest diseconomies of scale for investment activities. We also found that many pension funds have substantial X-inefficiencies for both administrative and investment activities. The two kinds of inefficiency differ across types of pension funds. Therefore, most pension funds should be able to improve their cost performance, and hence increase pension benefits.     

THE ECONOMIC VALUE OF PREVENTING RESPIRATORY AND CARDIOVASCULAR HOSPITALIZATIONS

This article provides estimates of the economic benefits of reducing respiratory and cardiovascular hospitalizations based on cost of illness and willingness to pay. The willingness-to-pay estimates indicate that individuals value prevention of a five-day hospitalization event at an average of approximately $2,400. Average total costs of illness per hospitalization are $22,000–39,000. A comprehensive cost-of-illness estimate that includes value of time losses for the hospitalization and at-home recovery periods provides a close approximation of total costs borne by third parties plus individual willingness to pay. Both exceed previous cost-of-illness estimates by about 10–25%. (JEL D61, I18, Q25 )     

ESTIMATION OF THE STOCK OF CAPITAL IN SPAIN

The paper presents the methodology and results of the estimation of the endowments of capital in the Spanish economy. It distinguishes between endowments of public capital and private capital. The series corresponding to the public sector cover the period 1955–97 and consider seven categories (or functions). The estimates are disaggregated by 17 regions and 50 provinces. The level of disaggregation is regional and provincial (NUTS2 and NUTS3 in European terminology). The private capital series cover the period 1964–97 and consider 17 sectors of production, with disaggregation at regional level. The information refers to two variables: gross formation of fixed capital (in current and constant pesetas) and capital stock in constant pesetas (base year 1990).     

The Real Cost of Financial Capital in the United States,Japan and Korea: Comparison and Convergence Tests

This paper presents alternative measures of the real cost of financial capital in the United States, Japan, and Korea over the 1975-90 period. Japan's cost of financial capital was the lowest among the three countries studied. The U.S. real cost of financial capital was higher than the Korean real cost. Our statistical analyses provide some evidence for shrinking the gap in the real financial costs of Japan and Korea vis a vis the United States. This is the reflection of increasing goods market integration and financial liberalization occurring in Japan and Korea. [F36, G15]     

Input cost, capacity utilization and substitution in the short run

This article studies the behavior of input cost shares in an environment where labor is costly to adjust, materials can be adjusted at no cost and capital is fixed. A model relating cost shares with relative prices and adjustment costs is proposed, allowing joint estimation of the elasticity of substitution and the adjustment cost function, which is an unknown function of the capacity utilization. Based on a panel of more than 700 manufacturing firms, we find evidence of strong input share variations according to the degree of capacity utilization. The estimated shapes of adjustment costs curves of labor are in agreement with our theoretical model, and we obtain sensible elasticities of substitution estimates. Based on such estimates, we find evidence of a negative (positive) bias in downturns (recoveries) in conventional productivity growth measures.     

PHYSICIANS' COST SHIFTING BEHAVIOR: MEDICAID VERSUS OTHER PATIENTS

Much of the debate about rising health care costs in the United States centers on the notion of "cost shifting." Cost shifting is loosely defined as charging one set of patients a higher price to offset losses on another set of patients. One aspect of the cost shifting debate that the empirical work has ignored is whether or not doctors—as opposed to hospitals—practice cost shifting. The analysis here investigates this question using the Physicians' Practice Costs and Income Survey, 1983–1985 (PPCIS, expanded version)
Using variation across states in Medicaid reimbursements, the analysis finds that lower Medicaid reimbursements tend to lower the fees physicians charge, contradicting the standard cost shifting story. Evidence also suggests that lower Medicaid reimbursements tend to cause physicians to treat fewer Medicaid patients. These results are consistent with profit maximizing behavior for physicians and also with the hypothesis that physicians exert some monopoly power.     

WHAT DETERMINES MIGRATION FLOWS FROM LOW‐INCOME TO HIGH‐INCOME COUNTRIES? AN EMPIRICAL INVESTIGATION OF FIJI–U.S. MIGRATION 1972–2001

This article examines the long-run and short-run determinants of migration from Fiji to the United States between 1972 and 2001 using a human capital framework, which is extended to take account of political instability in Fiji. In the long-run the authors find that differences in income levels, disparities in police strength, disparities in the number of doctors, costs of moving, and political instability in Fiji are all statistically significant with the expected sign. In the short run the cost of moving, lagged migration, political instability, and differences in both police strength and medical care are the main determinants of Fiji–United States immigration. ( JEL C22, F22)     

A cost function approach to the estimation of minimum efficient scale,returns to scale,and suboptimal capacity: With an application to Canadian manufacturing

This paper presents a new method for utilizing the statistical cost technique to measure minimum efficient scale (MES), returns to scale and suboptimal capacity. An application of the duality theory between cost and homothetic production functions leads to justification for ignoring poor quality or unavailable capital data and the pooling of several years observations to improve the efficiency of the estimates. The methodology is applied to 91 four-digit Canadian manufacturing industries to obtain estimates of MES, returns to scale, and suboptimal capacity. For a subsample of industries, we demonstrate that the cost function estimates of MES and returns to scale are more closely related to engineering estimates than are the ad hoc estimates usually found in the industrial organization literature.     

VERTICALLY INTEGRATED MEASURES OF THE RATE OF PROFIT IN THE UNITED STATES 1950–90

This paper investigates the importance of increases in the productivity of producing capital in estimates of the profit rate decline which occurred in the United States during the period 1950–90. We find that, when profit rate measures take into account the increasing productivity of producing capital stock (as measured by the embodied labor required to produce it), the observed decline is about one-half that found using conventional measures of profit. This finding has important implications for interest rate and investment policies.     

资本误配置的影响因素初探

资本市场的各种不完美性会导致资本在企业间不能够以资本的边际产出相等的原则进行配置,从而产生资本误配置(capital misallocation)。本文通过研究中国制造业企业的固定资产投资行为,用模拟矩方法(Simulated Method of Moment,SMM),估计了不同所有制类型的企业的资本调整成本(adjustment cost)函数、投资不可逆(irreversibility)程度以及折现因子(discount factor)(用来计算边际利率)。我们发现,民营企业面临的边际利率要远远高于外资企业,而后者面临的边际利率又高于国有企业和集体企业。不同类型的企业面临差别利率是造成资本误配置的最重要因素,投资不可逆次之,资本调整成本则是相对次要但仍然不可忽略的因素。     

On Setting Prices and Testing Cross-Subsidy with Accounting Data

Regulators are often faced with the challenge of both setting efficient prices and avoiding cross subsidy. Successful implementation of these goals requires estimates of both marginal costs and incremental costs. We present a methodology for estimating both marginal and incremental costs for postal products. The proposed algorithms combine micro-unit accounting data and econometric estimation of the cost structure. We apply the methodology to the U.S. Postal Service and produce estimates of marginal and incremental costs for eighteen postal products and incremental costs for another four groups of products.     

Technology and the demand for skills in Canada: an industry-level analysis

In this paper we examine the effect of technological change on the relative demand for skilled workers across Canadian industries. We find that skill upgrading at the aggregate level is less evident in Canada than in the United States and other industrialized economies over the 1981–94 period. Behind this overall trend on skill upgrading, there is substantial variation across industrial sectors. Consistent with the skill-biased technological change hypothesis, the technology indicators – the stock of patents used by the industry and the age of capital stock – are found to be significantly correlated with skill intensity. JEL Classification: E24, J23, J31, O33
Technologie et demande de travailleurs qualifiés: une analyse au niveau de l'industrie. Ce mémoire examine les effets du changement technologique sur la demande de travailleurs qualifiés dans les industries canadiennes. On montre que l'amélioration du niveau des compétences au niveau agrégé est moins claire au Canada qu'aux Etats-Unis et dans les autres économies industrialisées au cours de la période 1981–94. Derrière cette tendance générale, il y a cependant des variations importantes entre les secteurs industriels. On trouve que les indicateurs de niveau technologique (le stock de brevets, l'âge du stock de capital) sont co-reliés positivement au degré d'intensité d'utilisation des compétences – ce qui s'arrime bien avec l'hypothèse du changement technologique liéà une amélioration du niveau des compétences     

Measuring Aggregate Human Capital

Weconstruct a set of human capital indexes for the states of theUnited States for each census year starting in 1940. To do so,we propose a new methodology for the construction of index numbersin panel data sets. Our method is based on an optimal approachby which we choose the ``best' set of index numbers by minimizingthe expected estimation error subject to some research constraints.Some of the empirical findings are that the stock of human capitalin the United States grew twice as rapidly as the average yearsof schooling and that human capital inequality across stateswent up during the 1980s (while the dispersion of schooling actuallyfell). We conclude that using the average years of schoolingfor the empirical study of existing growth models may be misleading.