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Human Capital
Gross domestic product of a country depends on not only the amount of labour (work hours) used of producing goods and services but also on its productivity. One of the important factors that determine productivity of worked is human capital that is education. As seen above in the modern economics the concept of capital is not confined to physical capital such as machines tractors capital equipment etc. that raises productivity of labour but also includes what is called human capital. By human capital we mean the skills and knowledge that workers acquire through education and training. This human capital that is knowledge and skills are accumulated by human beings through education during the time they spend in primary and secondary schools and upto graduation and post graduation in collage or universities. Besides spcialised professional education such as engineering computer training management education and other raises greatly the productivity of workers therefore assimilation of human capital is generally called investment in people.
Human capital though less tangible than physical capital is similar to it in many ways. First like physical capital assimilation of human capital increases the ability of a country to produce more goods and services. Second like physical capital human capital is a produced factor of production. Produiotn human capital requires investment in inputs such as student time, teachers books sand libraries collage buildings. Thirdly like the physical capital the accumulation of human captain increases the productivity of workers and therefore causes their wages to rise fourthly accumulation of physical capital the accumulation of human capital requires the sacrifice of some present consumption so as to have more consumption in future.
Cost fo human capital: human capital is built through acquiring more education by spending more time in school college or university. Thus in spending more time in acquiring more educate one not delays one entry into labour force but also sacrifices income or wages which he could have earned by working during the time he spends for acquiring education. This is the opportunity cost of acquiring more education skills and grades (accumulating more human capital) but they spend time in acquiring more human capital with the expectation that they would be able to earn higher income or wages in the future as more education and hi her skills raises the productivity of the workers and therefore their wages/. Thus the students like he people who save face a trade –off between less consumption today for more consumption in the future.
Thus spending more on education today (reducing consumption) raises further income bt each additional investment in education provides a smaller and smaller return it follows from above that like physical capital expenditure on education also represents investment in capital which raises productivity in the future. Decides investment in education is tied to specific human being and therefore it is called human capital. thus according to mania like all forms of capital education represents an expenditure of resources at one point in time to raise productivity in the future. But unlike an investment in other forms of capital investment in education is tied to a specific person and this linkage is what makes it human capital) earns more income or wages than theses having less educator. The difference in wages between those with more educator and theses with less education are quite large and has been increasing for example college graduates in the untied states earn about twice as much as those workers who end their education with a high school diploma ‘’ it may be noted that this difference in earnings between workers with more human capital and those with less human capital on an average tends to be even large in developing countries where educated workers are in scarce supply.
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Human capital though less tangible than physical capital is similar to it in many ways. First like physical capital assimilation of human capital increases the ability of a country to produce more goods and services. Second like physical capital human capital is a produced factor of production. Produiotn human capital requires investment in inputs such as student time, teachers books sand libraries collage buildings. Thirdly like the physical capital the accumulation of human captain increases the productivity of workers and therefore causes their wages to rise fourthly accumulation of physical capital the accumulation of human capital requires the sacrifice of some present consumption so as to have more consumption in future.
Cost fo human capital: human capital is built through acquiring more education by spending more time in school college or university. Thus in spending more time in acquiring more educate one not delays one entry into labour force but also sacrifices income or wages which he could have earned by working during the time he spends for acquiring education. This is the opportunity cost of acquiring more education skills and grades (accumulating more human capital) but they spend time in acquiring more human capital with the expectation that they would be able to earn higher income or wages in the future as more education and hi her skills raises the productivity of the workers and therefore their wages/. Thus the students like he people who save face a trade –off between less consumption today for more consumption in the future.
Thus spending more on education today (reducing consumption) raises further income bt each additional investment in education provides a smaller and smaller return it follows from above that like physical capital expenditure on education also represents investment in capital which raises productivity in the future. Decides investment in education is tied to specific human being and therefore it is called human capital. thus according to mania like all forms of capital education represents an expenditure of resources at one point in time to raise productivity in the future. But unlike an investment in other forms of capital investment in education is tied to a specific person and this linkage is what makes it human capital) earns more income or wages than theses having less educator. The difference in wages between those with more educator and theses with less education are quite large and has been increasing for example college graduates in the untied states earn about twice as much as those workers who end their education with a high school diploma ‘’ it may be noted that this difference in earnings between workers with more human capital and those with less human capital on an average tends to be even large in developing countries where educated workers are in scarce supply.
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