Measurement of Human Capital Input Across Countries: A New Method and Results

Abstract

I propose the aggregate output divided by the wage rate of the industrial laborer in a country as a measure of the aggregate human capital input for that country. The justification is that the skills and health of industrial laborers are comparable across countries; therefore their human capital input can serve as a unit in the measurement. For international comparison, this method is better than other methods based on schooling, conceptually or in terms of applicability, given the data constraints for low-income countries. I use this method to compare the human capital inputs for 39 countries of diverse output levels. I find that human capital input differs between the lowest-income and the highest-income countries by a factor of about 2. This is significant but small relative to their output difference or the results from other methods. In neoclassical output accounting, the human capital input differences across countries, even after being combined with their physical capital input differences, leave a large part of their output differences unaccounted for.