What is human capital?

In economic terms, human capital is defined as the set of human resources with which a company has to develop its activity. Human capital is therefore a way of assessing and quantifying the personal skills of each member of the company.

History of the human capital concept

The term human capital arose around the XNUMXth century from the hand of economists such as Adam Smith who thought that when making decisions related to productivity of a company, these had to focus not only on technical factors, but also on humans. According to this economist, the human factor represents the authentic differentiating element that allows improving efficiency and productivity.

Later in the twentieth century economists such as Gary Becker and Theodore Schultz conducted studies in which they demonstrated that human capital was the variable that explained the business growth experienced in much of the West. As long as human capital as a variable in this equation was in correlation with the specialized training that individuals had.

Since then, economists of the time and later began to consider investment in human capital as a form of improve labor productivity. Considering human capital like any other type of capital. In which if you invest you get a higher return.

Human capital and factor of production

The Cobb-Douglas function is used to measure the relationship between a product and the consumption of technology, labor or capital, necessary to achieve it.

The idea of ​​introducing human capital into the Coob-Douglas equation arose between 1966 and 1988. The equation being represented as follows:

Y = A Kα H1- α


Y. It is the total production of the economy.

A. It is the total factor of productivity

K. It is the amount of physical capital

H. It is the amount of human capital.

0 <α <1. It is the percentage of participation of physical capital.

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