THE TREATMENT OF INTANGIBLE RESOURCES AS CAPITAL

The author describes the results of his current research designed to measure total investment, tangible and intangible, and the derived capital stocks for the U.S., 1929–1966. With respect to total investment, the estimates show a marked increase in its ratio to GNP. All of the increase occurs in the intangible component comprising R & D, education and training, health, and mobility. The increase was concentrated in the government sector, although households increased the proportion of disposable personal income devoted to total investment.
Consistent with the relative investment trends, the stock of intangible capital grew considerably faster than the tangible stock. The growth of total capital stocks was somewhat less than that of GNP, however, in both current and constant prices. Thus, the rate of return on total capital rose somewhat over the period. Average rates of return on human and nonhuman capital were closely similar.
In real terms, the growth of total capital stocks accounted for two-thirds of the growth in real GNP, 1929–1966. One-third of the growth is attributed to residual forces, chiefly economies of scale, changes in inherent quality of human and natural resources, changes in values and motivations, and changes in rates of utilization of capacity.
The growth of the ratio of real intangible stocks to real tangible stocks accounted for less than half of the increase in total factor productivity 1929–1966. This is significantly less than the contribution of intangibles as estimated by Denison, and the author adduces several reasons why his estimates may understate the contribution. Nevertheless, it seems that the net effect of the residual forces enumerated above must also have made a substantial contribution to the growth of tangible factor productivity and real GNP over the 37-year period.     

A METHOD FOR IMPROVED CAPITAL MEASUREMENT BY COMBINING ACCOUNTS AND FIRM INVESTMENT DATA

We propose a new method for estimating capital stocks at the firm level by combining business accounts information and investment data. The method also produces capital estimates at the sector or industry level by summing individual firms' capital stocks and appropriately inflating this sum to account for firms not included in the data set. Our approach has two major advantages compared with the much used Perpetual Inventory Method (PIM). First, long investment series are not necessary. Second, sector capital estimates are automatically adjusted for changes in the capital stock because of entry and exit of firms. While capital growth rates in Norwegian manufacturing were only 1 percent on average during 1993–2004 according to national accounts figures, our method yields much higher growth rates of 5.5 percent on average.     

SUGGESTIONS FOR TREATMENT OF HUMAN CAPITAL IN NATIONAL ACCOUNTS—WITH ILLUSTRATIONS FROM INDIAN DATA*

After giving a brief discussion of the biases that exist in the conventional estimation procedures followed in the construction of national accounts, this paper argues for restructuring of national accounts so as to treat human capital formation as investment rather than consumption and suggests that a beginning should be made in respect of schooling. The argument is based on the notion that “investment” or “capital” is that which yields future income streams and also on the rather obvious point that treating as consumption large outlays that really constitute investment distorts analyses of resource allocation, growth and income distribution, and obscures intersectoral relations. It is pointed out that the proposed restructuring of national accounts is more relevant and important for developing countries, many of which are embarked on investment planning. Another major point emphasized is that the input of students’time should be properly measured and included in the estimates of capital formation by schooling. To illustrate what these proposals imply, revision has been attempted of the estimates of (a) educational outlay (or activity in the education sector), (b) gross capital formation, and (c) gross national product, pertaining to the national accounts of a major developing country, namely India, for the years 1960–61 through 1965–66. The modified estimates, though first approximations and covering only a part of the human capital formation and having a systematically downward bias, nevertheless indicate an upward revision of the estimate of activity in the education sector by about 200 to 300 percent, of gross capital formation by about 50 percent and of the gross national product by 4 to 7 percent. These magnitudes show the substantial order of distortion involved in the conventional procedures.     

GROSS AND NET CAPITAL, AND THE FORM OF THE SURVIVAL FUNCTION: THEORY AND SOME NORWEGIAN EVIDENCE

In this paper we discuss the empirical measurement of capital stocks derived from data on gross investment. Two capital concepts are involved: gross capital-representing the capital's capacity dimension-and net capital–representing its wealth dimension. A brief summary of their components is presented.
The data base consists of long series of Norwegian national accounts data for gross investment at a disaggregated level of sector classification and for 1–3 capital categories within each sector. Survival functions, representing the process of retirement and decline in efficiency of capital units over time, with different curvature (concave, convex) and non-zero interest rates for the discounting of future capital service flows are considered. The effects of these parameters on the calculated gross and net capital stocks in the years 1956–82 as well as on the implied replacement and depreciation rates and rates of return are discussed.     

TOTAL INCOMES IN THE UNITED STATES, 1946–1976: A SUMMARY REPORT

Extended accounts of total income and product and associated capital stocks for the United States, in current and constant dollars, are offered for the years 1946 to 1976. They include intangible and tangible capital accumulation and non-market and market outputs in all sectors, services of government and household capital and of unpaid household labor, and opportunity costs of students. Defense and police services are classified as intermediate product; a portion of commercial media services is counted as final product. Expenses related to work are subtracted while the values of employee training and human capital formation and net revaluations of existing tangible capital are added.
Total incomes (TISA) net national product was 50 percent greater than official Bureau of Economic Analysis (BEA) NNP in 1976. BEA gross private domestic investment was only about 18 percent of TISA gross capital accumulation. Intangible investment and TISA net domestic capital accumulation grew more rapidly than BEA net private domestic investment. Household investment has been growing while there have been sharp declines in government investment, particularly in research and development. Contrary to some views of the import of the narrower BEA accounts, total capital accumulation appears to have risen considerably more rapidly than total consumption, 6.3 percent versus 2.2 percent per annum from 1946 to 1976, thus increasing sharply its share of TISA GNP.     

STOCKS AND DEPRECIATION OF HUMAN CAPITAL: NEW EVIDENCE FROM A PRESENT-VALUE PERSPECTIVE

Responding to a perceived growing interest in human wealth estimates, this paper offers a framework for measuring the aggregate stock of human capital and then implements the procedure for the United States male population age 14 to 75. Unlike previous estimates of human wealth that are based upon historical or resource costs, these estimates measure the capital stock as the discounted resent-value of expected lifetime returns. In the estimation, returns are equated with earnings data from the 1970 U.S. Census 15 percent Public Use Sample for out-of-school males, adjusted for employment and survival probabilities, adjusted for an assumed exogenous growth in future earnings, and discounted at 7.5 percent.
We provide cross-sectional estimates of individual stocks of human capital by age and educational attainment, as well as expected lifetime wealth profiles for individuals by level of education. These individual profiles can be used to obtain direct estimates of age-specific depreciation which suggest human capital is subject to significant and prolonged appreciation before nearly straight-line depreciation begins around middle age. This finding is all the more significant since resource-cost estimates of human capital which must assume a depreciation pattern to obtain stocks have always imposed a much faster rate much sooner.
Finally, an aggregate estimate of the stock of human capital for all males is supplied and its sensitivity to the choice of the discount rate, tax laws, and expected exogenous growth is analyzed. This seemingly-conservative stock estimate is then compared to a much lower resource-cost estimate offered recently by John Kendrick. A discount rate over 20 percent would be needed to equate the two measures. In trying to reconcile the two figures, we raise some new questions about the validity of both approaches for human capital accounting.     

Redistributive Tax and Growth in a Model with Discrete Occupational Choice

An optimal redistributive tax-subsidy formula is derived for a growth model where income inequality is endogenously driven by an adult's choice of occupation between work and management. Investment in human capital is the engine of growth. The world's stock of exploitable knowledge as well as the economy's average human capital determine the potential rate of return from investment in human capital in an economy. How much available knowledge would be exploited in the economy depends on the proportion of innovators in our model. A redistributive tax reform impacts growth as well as income inequality via its influence over the occupational choice. The optimal redistributive tax rate is path-dependent in the sense that it depends on the initial wealth distribution. The normative implication of the model is that the optimal capital income tax rate could very well be positive if the initial wealth inequality exceeds a threshold. The optimal capital income tax rate depends inversely on the initial wealth inequality.     

Economic Democracy: Solution or New Challenge ∗

Abstract Kaleckians and partisans of the capital monopoly approach have argued that additional outlays on unproductive labor increase economic activity under three conditions: investment is sensitive to realized rates of capacity utilization; savings out of wages and salaries are assumed away; prices are fixed by a markup over unit direct costs. The present model examines what happens when the last hypothesis is modified, i.e., when megacorps are assumed to fix prices on the basis of total unit costs, more specifically on the basis of target-return pricing procedures. Because higher costs are shifted on to productive labor, through higher prices and a reduction in their real wages, additional unproductive outlays may have a negative impact on economic activity. It turns out, in addition, that one must carefully distinguish between unproductive labor outlays and unproductive capital outlays when firms are assumed to shift these additional costs to consumers, on the basis of target-return pricing procedures.     

Human capital and economic development

This paper develops a general equilibrium model of fertility and human capital investment with young adult mortality. Because young adult mortality is negatively related to average young adult human capital, human capital accumulation lowers mortality, inducing demographic transition and industrial revolution. Data confirm that young adult mortality is related negatively to schooling, and the rate of return to schooling, and positively to fertility. The data indicate a negative relationship between TFP growth and schooling accumulation. The model fits the data on country populations, per capita incomes, human capital, total fertility rates, infant mortality, life expectancy and conditional life expectancy.     

Estimates of Capital Stock and Capital/Output Coefficients by Industries: Korea (1953–86)

This paper constructs a polynomial-benchmark model to estimate gross and net capital stocks by explicity estimating implicit retirement rates and depreciation rates. The model is applied to Korean data (1953–86) where such data as national wealth survey, national income accounts and industrial census are available. There alternative series of capital stock estimates are generated and compared with previous estimates. It is shown that the use of a pure perpetual-inventory model or a benchmark-year method alone may introduce a significant bias in the measurement of capital stocks for developing economies.     

中国农村人力资本收益率研究

本项研究依据的数据资料是“中国人力资本投资与城乡就业相关性研究”课题组在 2 0 0 2年 7月至 2 0 0 3年 1月对全国 1 5省市进行的问卷调查。在对数据进行分析的基础上 ,使用计量经济学的相关模型估计了中国农村不同形式人力资本收益率。     

农民专业合作社:市场势力有损经济效率吗?

笔者动态考察了经济运行过程,发现农民专业合作社在供给农产品等方面的市场势力引起的福利损失只是一个局部现象。考虑到转移给农民的财富大部分转化为人力资本,而由于人力资本投资的回报率高于物质资本,因而增加的投资回报在一定条件下能够弥补市场势力造成的福利损失。农民专业合作社的市场势力不会损害经济效率,甚至可能提高经济效率。     

HUMAN CAPITAL: DETERIORATION AND NET INVESTMENT

The current practice in national accounting is to exclude from national product investment in schooling and on-the-job training, except for direct costs of schooling which are included in consumption. Foregone earnings, which form the major part of investment in human capital, go unrecorded.
Much is to be gained in consistency and analytical clarity by treating human capital like physical capital in national accounting. Estimating the amount of foregone earnings net of deterioration, that is, net investment, is a step in this direction.
Using the framework of the life-cycle hypothesis of earnings, and assuming declining-balance deterioration of human capital, estimates of deterioration rates in respect of American males by race and education level are computed for 1960. Every such d is, however, the minimum consistent with the respective costs and benefits profile. Hence an upper limit d is assumed. The model generates for each costs and benefits profile and in respect of either d , a year-by-year series of net investment in human capital. These are used to obtain two estimates (which turn out to be close to each other) of aggregate net investment in American white males in 1960. On the basis of these estimates, aggregate net investment in human capital is found to be about equal to net investment in physical assets (including consumers'durables).
It is also found that the Denison method of estimating the contribution of the increase in human capital to economic growth understates this contribution by a ratio approximately equal to net investment in on-the-job training to returns to human capital. This was about 16 percent in 1960.     

EDUCATION AND THE NATIONAL WEALTH OF THE UNITED STATES*

Human capital theory has motivated a great many empirical investigations into the relationship between education and earnings potential. These studies test refinements of the theory, but do not attempt to value education for the economy as a whole. This study develops series which track human wealth and its educational components for the United States from 1946 to 1980. Three related educational time sequences emerge: (1) schooling wealth, the present value of the current and future contributions of the existing schooling stock to national income; (2) net change in schooling wealth, the amount added to present value in that year; and (3) schooling investment, the present value of the future contributions of the new schooling conducted in that year. One important lesson of this exercise is that the last two series can be quite different as a result of the pattern of appreciation and depreciation of human wealth over the lifetimes of individuals. Moreover, education increases the age of peak human wealth and thus should shorten the period during which individuals save for retirement. This phenomenon may induce a demographic cycle in the nation's savings rate, especially evidenced with the aging of the baby-boom cohort. The magnitudes of the human and schooling wealth estimates are large when compared to financial wealth. For a 4 percent rate, the period-wide average for human wealth is five times-and schooling wealth 2.6 times-the Federal Reserve Board's measure of household net worth. These estimates are naturally sensitive to the discount rate chosen, but show that the gap between human and financial wealth has been widening and that the value of schooling provided in any year greatly exceeds its cost. Schooling represents a form of saving whose value is several times the conventional measure of saving.     

TRENDS IN AGGREGATE HOUSEHOLD WEALTH IN THE US., 1900–83

New estimates of aggregate household wealth for the U S. covering selected years in the period from 1900 to 1983 are presented. I find that marketable wealth per capita grew at 1.46 percent per year in real terms over the 1900–83 period, while real wealth per household grew at 0.81 percent per year. However, the growth rate was not uniform over the period, with the rates high during the 1900–29 and the 1949–69 periods, and slow during the other years. Moreover, real per capita wealth actually increased more slowly than real per capita disposable income and real per capita GNP over the century. I also find dramatic changes in the composition of household wealth over the century. In particular, both tangibles and fixed claim assets increased relative to total assets over the period from 1900 to 1983, while equities fell from about half to a quarter. Owner-occupied housing increased only moderately as a proportion of assets, from 17 percent in 1900 to 20 percent in 1983. Unincorporated business equity fell from over a third of total assets to 12 percent. Among financial assets, the biggest relative growth occurred in deposits in financial institutions, which grew from 8 percent in 1900 to 22 percent in 1983. Corporate stock had the most volatile behavior in the household portfolio, growing from 13 percent of total assets in 1900 to 27 percent in 1929, falling to 10 percent in 1949, rising to 22 percent in 1965, and then falling to 11 percent by 1983. Debt as a proportion of total assets rose from 5 percent in 1900 to 16 percent in 1983. Finally, both pension reserves and social security wealth increased relative to marketable assets from virtually zero in 1900 to 12 and 48 percent, respectively.     

Investment and interest rates: An econometric dissection

A simple structural model of Australian investment behavior based on Foley and Sidrauski's (1970) work is constructed and estimated by full information maximum likelihood. It is then used to assess in several steps the total effect of interest-rate changes on the rate of capital accumulation. The results indicate that investment is a little sensitive to changes in interest rates. Moreover, it appears that this insensitivity does not result from the low estimates of some key parameters, but rather from the interactions of many interrelated forces allowed for by the model once the rental price of capital and the return of capital are endogenized.     

Wealth,Natural Capital,and Sustainable Development: Contrasting Examples from Botswana and Namibia

Theoretical work has demonstrated that sustainable development requires non-declining per capita wealth, where wealth is defined to include produced, natural, human and social capital. Several studies have attempted to measure total national wealth or changes in wealth, but have been seriously hampered by a lack of data, especially for natural and human capital. To address this problem, the UN and other international statistical agencies developed a standardized framework for environmental accounts, the System of integrated Environmental and Economic Accounts (SEEA). Using the newly available asset accounts for natural capital, national wealth accounts are constructed and used to assess the contrasting development paths of Botswana and Namibia. Botswana, with an explicit policy of reinvestment of resource rents, has roughly tripled per capita wealth and national income over the past two decades. Namibia, with no explicit policy to use natural capita to build wealth, has seen per capita wealth and income decline.     

Regional Accounts of India: Methods,New Estimates,and Their Uses

For large economies with substantial regional variation, it is of great importance for policymakers and economic analysis that macro‐economic statistics are broken down by region. This paper reviews the regional accounts in India, discusses their role in Indian federal and state policies, and provides new estimates to cover major data gaps. Statistics on domestic product by Indian state, broken down by industry, are regularly published. But despite demands and recommendations by various commissions and policymakers, a comprehensive system of regional accounts is yet to be developed. New estimates for the period 1993–2010 are presented for saving and the macro‐economic expenditure by Indian states, like final consumption, capital formation, and trade balance. They show, for example, that some of the fastest growing Indian states have increased their saving and investment rates to 50 percent of their domestic product.     

Anticipated Fiscal Policy Changes and Goods Market Adjustments

Abstract. Government policies are frequently known to be temporary and thus their termination is perfectly anticipated. These foreseen policy changes must be consistent with equilibrium in both the goods market and asset markets. Potential problems arise because prices often play dual roles, both as final goods prices, and as asset prices, as components of rates of return. We show how the economy accommodates an anticipated policy change depends upon its production flexibility and its structure. With flexible investment, an anticipated reduction in government expenditure is fully accommodated by capital accumulation. When investment involves adjustment costs, the marginal utility of wealth and the price of capital both jump so as to maintain equality among rates of return. Goods market clearance is maintained by a combination of increases in consumption and investment. Extensions of the model to include inventories and to a small open economy are also considered and contrasted.