Human capital estimation in higher education

Abstract

The concept of human capital (HC) could be defined, from an economical viewpoint, as a stock variable representing the capacity of an individual to produce a sustained flow of income due to its investment in (higher) education and work experience. This paper focuses on the empirical estimation of the graduates' latent variable HC, composed of two principal dimensions, Educational HC and Work Experience HC, within a realistic structural model, allowing causal relationship among endogenous and exogenous indicators, taking into account possible effects of external covariates. New administrative archives and a novel methodological approach are used. The methodology is applied to estimate HC of graduates in several universities of the Milan area in the early stages of their working career. The empirical results confirm the structure of the Italian job market, where investment in HC through higher education plays only a marginal role for explaining the economic performance.