Economic Development, Growth of Human Capital, and the Dynamics of the Wage Structure

Author(s): Jacob Mincer

Source: Journal of Economic Growth, Vol. 1, No. 1 (Mar., 1996), pp. 29-48
Published by: Springer
Stable URL: http://www.jstor.org/stable/40215880
Accessed: 14/10/2010 12:46

Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at
http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless
you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you
may use content in the JSTOR archive only for your personal, non-commercial use.

Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at
http://www.jstor.org/action/showPublisher?publisherCode=springer.

Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed
page of such transmission.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of
content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms
of scholarship. For more information about JSTOR, please contact support@jstor.org.

Springer is collaborating with JSTOR to digitize, preserve and extend access to Journal of Economic Growth.

http://www.jstor.org
 ofEconomicGrowth,
Journal 1: 29-48 (March,1995)
© 1995 Kluwer Academic Publishers,Boston.

EconomicDevelopment,GrowthofHumanCapital,
and theDynamicsoftheWageStructure

JACOBMINCER
New York,NY 10027 and
EconomicsDepartment,Columbia University,
National Bureau of Economic Resesarch

In this paper I elucidate the sources of growthof human capital in the course of economic development. On
the supply side (Section 1) I include the growthof familyincome, urbanization,the demographictransition,
and the risingcost of time.Thesupplyside alone cannot explain the continuousgrowthof humancapital as it
impliesa self limitingdecline in ratesof returnbelow those in alternativeinvestments.Such declines are offset
by growingdemands forhumancapital in the labor market.Growthof demandforlabor skills is a functionof
capital accumulationand of technologicalchanges. Evidence on thishypothesisis summarizedin Section 2 and
on supplyresponsesto growingdemandforhumancapital in Section 3. Changes in theskill and wage structures
in the labor marketare an importantpartof the evidence.The reciprocalrelationbetweeneconomic growthand
the growthof humancapital is likelyto be an importantkey to sustainedeconomic growth.A caveat applies to
indirecteffectsof economic growthon familyinstability, which may lead to a deteriorationof childhoodhuman
capital in some sectorsof society.

Keywords:economic development,humancapital

J24,J31,01 0
JEL Classification:

The conceptofhumancapitalplaysa majorrolein moderntreatments ofgrowththeoryand

oflaboreconomics.In one sense,thedistinction betweenthetwois inlevelsofaggregation.
At themacroeconomiclevel thesocial stockof humancapitaland its growthare central
to theprocessof economicgrowth;at themicrolevel differences in humancapital stock
and in theirgrowthcan explainmuchof theobservedvariationin thewage structure and
in thewage distribution among individualsand groups. Althoughpursued independently,
theseapplicationsview humancapitaland its growthas a cause of economicgrowth:of
theeconomyas a whole in thetheoryof growthand of individualsin laboreconomics.
Human capital is implicatedin theprocess of growthnotmerelyas a cause butalso as
an effectof economic growthor of developmentsgeneratedby economic growth. The
reciprocalrelationbetweeneconomicgrowthand thegrowthof humancapitalis likelyto
be an importantkeyto sustainedeconomicgrowth.
It is mypurpose,in thispaper,toelucidatethesourcesofgrowthofhumancapital. I stress
therole of thefamilyand of thelabormarket,as revealedin researchof laboreconomists,
includingmyown.
30 MINCER

1. SupplySide

Thegrowth ofhumancapitalintwentieth-century economies hasbeenspectacular - from

of
lowlevels schooling and a deal
great ofilliteracy even in advanced countries inthelate
nineteenth to a
century largemajority high of school graduates at the present time. The
continuing growth of human capitalis an integralpartof several other profound social
transformations experienced in thiscentury.Table 1 showsthechangesfortheUnited
States:(1) growth ofeducation, fromverysmallproportions ofhighschoolgraduates to
almostuniversal completion, (2) a sevenfoldriseinpercapitarealincomes, (3) urbanization,
from nearlyhalfofthelaborforceinagriculture tolessthan5 percent, (4) thedemographic
from
transition, largeandextended familieswithhighfertilityandmortality tonuclearand
subnuclear familieswithmuchgreater longevity andbetterhealth,and(5) increased female
participationinthelabormarket, froma miniscule proportion ofmarried womenworking
outsidetheir households in 1890tonearly two-thirdsattheendofthecurrent century.
The developments in theUnitedStatesareparalleledbythehistory ofmostcurrently
advancedeconomies.Thoughmorerecent,thesetrendsare unfolding as well in less
developed countrieswhere, as in most of them, income growth positive.Table2 shows
is
thecurrentdifferencesbetween poorandadvanced countries,whichverymuchcorrespond
to thetrends shownfortheUnitedStatesinTable1. Thetrends arestrongly interrelated;
all aregeneratedbyandfeedbackoneconomicgrowth.
In whatfollowsI sketchtheeconomicanalysisthatrelatesthesetrendsto economic
growth andpointstothegrowth ofhumancapitalas their consequence.

ofIncomeGrowth
1.1. DirectEffect on EducationalTrends

Educationis an assetthatgenerates notonlyearnings butalso a streamof nonmarket

utilities
involvinglearning and culture.As such, may viewedas a consumption
it be good,
which, is directly
therefore, related
toincome.Thepositive incomeeffectsapplyalsotothe
acquisitionofeducation as aninvestment good,totheextent thatimperfectcapitalmarkets
necessitatea degreeofself-financing ofeducation. Thepositiveeffectofparentalincome
on schoolenrollment of theirchildren is documented in manymicroeconomic studies.
Intercountry comparisons (Table3) showsimilar results.Butas Table3 shows,theeffect
ofincomeis greatly reduced:thecoefficient declinesgreatly whenvariables representing
urbanization, demographic change, and women's labor force areincluded.
participation
Theincomecoefficient is reducedbecausetheadditional areinpartgenerated
variables by
income(wage)growth.Theireffect on education can thereforebe viewedas an indirect
effectofeconomicgrowth.

1.2. Urbanization

Givenlowpriceandincomeelasticities
ofthedemandforfood,thegrowth ofindustrial
whether
productivity, ornotagricultural growsatthesameorlesserrate,results
productivity
ina reduceddemandforfarmlaborandlowerwagesinagriculture
thaninindustry.1The
ECONOMIC DEVELOPMENT AND GROWTHOF HUMAN CAPITAL 31

5 1 * *
8 S ° vo t^
3 = <N ^ TT

1?
I
!.
« - -
§ |
< 2 s
a |
£ ^

I 3 9 8 3

ll S 5 2 |
^ I
* a
«^ « 3
O .S 3 K

<. On
O ON

"" Q- la o

I~ ?J .ill
ll «
3 <
1 sl» 1 &*
^ 1^?^ § 55 I I

I ."
U §
1
o
I&
! *. 1 I
s " s
t is 1 1 if
°
gQ. O O 3 O

2
< 0 £'*e 3*l^
tS ■£ °° ft o . . . .
32 MINCER

Table2. Intercountry ofGrowth

Comparisons (1990 andbefore)*
RelatedVariables (byLevel
ofIncome)

Countries HighIncome MiddleIncome Low Income

Excl Indiaand
All China
(1) (2) (3) (4)
% postsecondaryeducation5 11.4% 3.0% .6% .6%
Yearsofschool,maleb 10.9 6.1 4.3 3.1
Yearsofschool,female6 10.7 5.0 2.2 1.5
RealGDP percapitac $18,170 $4,830 $1,510 $1,320
Rateofgrowth (1965-1980)d 3.0% 3.1% 2.7% 1.9%
Rateofgrowth (1980-1990)d 2.4% 1.3% 4.6% 1.6%
% Urbanpopulation,1990 78% 60% 29% 26%
% Urbanpopulation,1960 69% 41% 17% 13%
Lifeexpectancy,1991 76.4 67.2 61.9 54.7
Lifeexpectancy,1960 69.6 54.1 44.2 41.0
Infantmortality6 1.4% 4.6% 7.7% 9.8%
rate
Totalfertility 1.8 3.3 3.8 5.5
Percentofwomenin 42% 32% 33% 28%
laborforce
growth:
Population
Rate1960-1991 .8 2.0 2.2 2.6
Rate1990-2000 5 1.6 1.9 2.5

Source:U.N. HumanDevelopment
Report(1993).
Notes
middleincome:GNPpercapita
a. Highincome:GNPpercapita< $6,000(35 countries);
lowincome:GNPpercapita< $500 (46 countries).
> $500to$6000(92 countries);
ages25 +.
b. Population
c. Purchasing
powerparity($).
d. Rateofgrowth ofGNPpercapita.
e. Perthousandlivebirths.

shareof theagricultural laborforcein thetotallaborforcedeclinesmorerapidlythanthe

share of food expendituresin consumerbudgetsas theirincomesgrow. Cities grow as a
resultof labormigrationfromfarmsin responseto theurban-rural rather
wage differential
thanfromurbanfertility alone. Urbanfertility is historicallylowerthanruralfertility
as
the netcosts of raisingchildrenare lower on the farm.Withsmallerfamiliesin the city
thanon the farmand greaterprofitability of educationin the urbanenvironment, urban
familiesdevotemore resourcesper child to theireducation. But as urbanizationgrows,
expectedmigrationflowsof the youngto thecities increaseincentivesforfarmfamilies
to investin theirchildren'seducationas well as to reducetheirnumber.At thesame time
technologicalchanges in agricultureincreasetheimportanceof educationand reduce the
usefulnessof experience,therebyreducingthepowerof theeldersin theextendedfamily.
Both technologyand migrationcontribute to thedeclineof theextendedfamily.2
 ANDGROWTH
ECONOMICDEVELOPMENT OF HUMANCAPITAL 33

andFactorsAffecting
Table3. Education It

ofIncome:SimpleRegression
a. Effects Coefficients
of(log) Income*
(OLS).
On Women's
Variable YearsofSchool Enrollment Percent Infant life Labor
Male Female Rate Urban Mortality Expectancy ForceRate6

(1) (2) (3) (4) (5) (6) (7)

Coefficient 1.83 2.03 19.1 15.1 -32.4 6.9 5.8
T-ratio (18.9) (19.6) (29.0) (29.0) (18.2) (35.5) (29.5)
R2 .71 .71 .77 .68 .46 .76 .69

Education0:
b. FactorsAffecting Multiple (OLS)
regression
Dependent
Variable In Y TFRd LEXP*1 UWU* MUS* R2
Maleeducation .53 -.33 .065 .0005 .21 .77
(2.3) (2.6) (25) (2.1) (0.6)
Femaleeducation .52 -.28 .092 .0006 -0.90 .80
(2.2) (2.2) (3.6) (2.2) (2.6)
school
Secondary 6.65 -5.16 .066 .0034 3.91 .85
rate
enrollment (4.8) (6.0) (3.5) (2.3) (1.7)

Sources:U.N.HumanDevelopment Reports(1993-95).
Note:Sample= 83 countries withcomparable dataforyears1970to 1990infive-year
intervals.
=
a. Log ofGNPpercapita InY; intercepts notshown.
b. Ratioofwomen'surbanlaborforcetopopulation.
c. InY is lagged10 yearsinrows(1) and(2); intercepts
notshown.
rate.
d. Totalfertility
e. Lifeexpectancyatbirth.
f. Women'surbanlaborforcerate.
g. DummyforMuslimcountries.

Transition
1.3. TheDemographic

Thedemographic transitionis thelong-term changefrom populations withhighbirth and

deathratestomuchlarger populations withlowbirth anddeathrates.Familysizechanges
fromlargeandextended households tosmallnuclear(evensubnuclear) units.Itis inextri-
cablyalso a changefrom low to highlevels of human capitalperperson.Thelong-term
growth ofhuman is
capital intimately connected with the demographic transition bothas
a factorinitas wellas an outcome ofit. Thechangesinfamily sizeandinhumancapital
during thetransitionarelinkedas an effective, though notnecessarily direct,substitution
ofquality forquantityofchildren.
WhileMalthuswas right in concluding thateconomicgrowth due to increasesin pro-
ductivitywouldsupport a larger population, hisprediction thatpopulationgrowth would
ultimately the
eliminate income gains from productivitygrowth was incorrect.The error
is due to hisbasicallybiologicaltheory is limited
thatfertility mainlyby fecundity and
34 MINCER

thattherefore is theultimatefactorthatadjustsnumbersof people to available

mortality
resources.
Modern economistsdiscardtheMalthusiannotionof thepredominanceof biologically
conditionedfertilityand substitute
forit a demandfunctionforchildren3thatfocuses on
boththeirnumbersand"quality,"ortheirhumancapital. This leads toa betterunderstanding
of the actual dynamicsof thedemographictransition thatwas triggeredby theIndustrial
RevolutionintheWestsometwocenturiesago and intheless developedworldinthecurrent
century.
The startingpointofthedemographic transitionanalysisis thedeclineinmortality
thatset
in withthegrowthof income4inWesternEurope. Aftera ratherlong lag, fertility beganto
decline in responseto thedeclinein mortality.This response,notanticipatedby Malthus,
decisionswere mattersof choice ratherthanbiology. If the family
reveals thatfertility
contemplatesan optimalratherthanmaximalnumberof survivingchildren,thedecline in
mortality behavior,since thesame numberof survivorscan be
forcesa revisionin fertility
produced with fewer births.Fertilitymay therefore decline,butas thecost of producing
a survivordeclines,5moresurvivingchildrenare desired. Since thenumberof survivors
representsthedifference betweenbirthsand deathsof children,if fertilitydeclines while
numberof survivingchildrenincreases,fertility mustdecline less rapidlythanmortality
yieldingpositiveand increasingratesof populationgrowth.
A necessaryconditionfora reductionin mortality to producea reductionin fertility
is
a price-inelasticdemandforchildren(T. P. Schultz,1981). To see this,definethecost of
producinga survivingchildas

7T5= -^-, (1)

wherep(s) is theprobabilityof survivalto adulthood,whilec is thecost of raisinga child,

conditionalon survival. A reductionin mortalityincreasesp(s), whichreduces ns and
so increasesthe demandforsurvivingchildren. If b is birthsper family,the numberof
survivingchildrenperfamilyis givenby

n5 = bp(s). (2)

Using equations(1) and (2), and holdingc constant,it can be shownthat

=«*.*- L
«*!.* (3)
wheree standsforprice elasticity.e^n mustbe positiveforbirthsto decline, when an
increasein p(s) reduces7ts.Hence, onlyif |en>7r|< 1 will a decline in birthsmaterialize,
even if c does not grow. But since en>n< 0, ns increasesand thebirthratedeclines less
rapidlythanmortality.
The lag priorto thedropin fertilitymaybe attributed \> 1 initially.More likely
to \en>1t
theperceivedneed and practiceof fertility controlrequireda culturaladjustmentthatwas
protracted.Less ofa lag can be expectedand is observedinthecurrent in LDCs as
transtion
thecultureand technologyof fertility controlare transmittedfromtheadvancedcountries.
Indeed,thetotaldurationof transition shorterin theLDCs.6
is expectedto be significantly
 ANDGROWTH
ECONOMICDEVELOPMENT OF HUMANCAPITAL 35

The increasesinratesofpopulationgrowth("populationexplosion")characteristic ofthis

initialor firstphase of thedemographictransitiondid takeplace even when,aftera lag,
was declining.But forpopulationgrowthratesto decline,as theydid in thelater
fertility
phase thedemographictransition,
of had to declinemorestronglythanmortality.
fertility
This happenedprogressively as costsof raisingsurvivingchildren(thenumerator c in ns)
to
began outstrip thegains insurvival(p(s)). But even withoutincreases inc thereduction in
mortality producedincreasedincentivesto investin humancapital: increasesin longevity
and the improvedhealthunderlyingthemimplya greaterprofitability of investment in
people as theeffectivepayoffperiodlengthens.7 Withlimitedbudgets,investments inhealth
and educationof childrenreducedfertility further.The initialphase of thedemographic
transition,whenpopulationgrowthincreasedmergedintothenextphaseas fertility declines
acceleratedin consequenceof growingcosts (c) of raisingchildren.
In additionto costsdue tourbanliving,thegrowthofrealwages in industry and services,
the opportunity cost of timein raisingchildrenis anotherfactorthatleads to declines in
populationgrowth8 andtheultimatecompletionofthedemographic transition,all thewhile
providingfurther incentivesforinvestment in humancapital,as thenumbersof children
declineand incomeperchildgrows.

1.4. Growthof theFemale Labor Force

Growthof thefemalelaborforceis a featureof twentieth-century societiesexperiencing

economicgrowth.9 The basic analysisof thisphenomenonrecognizestheproductivenon-
marketactivitiesofconsumersthatarecombinedwithpurchasedmarketgoods and services
to createfinalobjectsofutilityor "commodities"in Becker'sterminology. These activities
use time,and growthof real wages raises the opportunity cost of nonmarket time. Con-
time- time spentin householdproduction - are reduced
sequentlyinputsof nonmarket
in favorof substitute marketinputsboughtwithincreasedmarketearnings.The transfer
of timefromhouseholdproductionto marketearningsshows up in growinglabor force
participationof womenwhosehouseholdactivitiesare curtailedin favorof earningactiv-
ities. Anothereffectof thegrowingcost of timeis thereductionof householddemands
fortime-intensive "commodities"such as child raising,whichacceleratesthedownward
trendin fertility.Both consequencesrequirean initiallysharpdivisionof labor between
thesexes in marketand householdactivities,whichis clearlymuchgreaterat theoutsetof
economicgrowth(or in less advancedeconomies) whenwages arelow and fertility is high,
takingup much of theadultlife of mothers. As a work
result, of married women outside
thehouseholdis infrequent at thatstage.
Two qualificationsto thisanalysisinvolve income effects.10 If demandforhousehold
intensivecommoditieswere incomeelastic (77 > 1), theanalysismay nothold. Also, if
productivity growthin householdactivitieswere as (or more) rapid thanin the market,
relativepricechangesthatgeneratethesubstitution fromtimeintensiveto othercommodi-
ties would eithernotmaterializeor reverse.The answersto thesepossible objectionsare
(1) relativepricechangesthatcreatethepropersubstitution movein theproperdirectionso
as market grows more rapidlythan household - a proposi-
productivity
long productivity
tionacceptableon bothlogical and empiricalgroundsand (2) ifproductivity in nonmarket
36 MINCER

wereto advanceas rapidly

activities as inmarket activities, relative pricesforhousehold
(time)-intensive commodities wouldnotchangeovertime,eliminating thesubstitution ef-
fectButincomegrowth duetoproductivity growth would reduce the share ofincome spent
ontime-intensive commodities, henceoftimespentinthehousehold, provided theincome
ofdemandfortimeintensive
elasticity commodities is lessthanforother commodities (less
thanunitary). Thisveryplausibly to
applies production of necessities that requirea great
dealofhousehold timesuchas food,shelter, andotherutilities including children.
Smallincomeelasticities are,indeed, observed inempirical demand functions fornumbers
ofchildren,butlargeonesareobserved forexpenditures onchildren's 1Hereboth
"quality."1
thesubstitution andincomeeffects workinthesamedirection: Muchoftheexpenditure
on market goodssubstituted fornonmarket timeas inputsto theraisingof children are
purchased educational inputs.And the income elasticity of demand for "quality" of children
suchas theireducation is muchgreater thantheelasticity ofdemandforquantity, as the
analogy with consumer durables would predict, and is indeed observed.
In sum,thegrowth ofhuman capitalofchildren is duetoall three developments: relative
pricechangesduetoincreases inthecostoftime,standard incomeeffects, andproductivity
effects.
I portrayed thegrowth ofwomen 's laborforceandreductions in fertility as jointlyde-
pendent oneconomicorwageandincomegrowth, andchildren's humancapitalgrowth as
an outcome.Of course,labor-force growth andreduction offamily size also exertdirect
negativeeffects on oneanother, thereby speeding theprocesses.
The growth ofhumancapitalas an outcome is notrestricted tochildren; italso extends
towomenas theycontemplate theirfuture roleinthemarket andinthefamily. Twocon-
siderationslead to incentives forwomen'sexpandedinvestment in themselves. First,as
timespentintheworkforce increases withimproved healthandlongevity, andas timespent
inchildcaredecreases,thepayoff tohumancapitalinvestments at schoolandon thejob
growssincethepayoff periodis lengthened. Increasesin schoolenrollment and injob
trainingofwomenareindeedobserved incorrelation withlabor-force growth, especially
withthegrowing continuityoflabormarket activities(Mincer,1993a).Second,theincreas-
ingmarital separation andturnover maybe relatedtothedeclining division oflaborinthe
family and toreduced parental stakes in children as their number declines. Awareness ofa
highprobability of divorce, which is likely to cause an income loss tothe spouse without a
market career,leadstoa precautionary growth ofmarket workactivities toensure economic
independence (see Johnson andSkinner, 1986). Increasedinvestments in education and
traininganddelayedmarriage andfertility arevitalpartsofthisresponse toriskandmore
generallytothegrowing expectation ofa longworking life.

2. DemandSide

effects
Allthedescribed ofeconomic onhuman
growth whether
capitalformation director
indirect,
generatecontinuouslyexpanding the
suppliesofhumancapital.Higherincomes,
increased
costoftime,cityliving,
thedemographictransition, rolesofwomen
andchanging
inthemarketandinthefamily - all increase forhumancapitalinvestment
themotivation
byindividuals
andfamilies.
ECONOMICDEVELOPMENTANDGROWTH
OF HUMANCAPITAL 37

But thisis not a completeexplanationof the unceasingupwardtrendin humancapital

accumulation.Theoretically, a trenddue to theexpansionofsupplyis self-limiting: sooner
or latersuch investments wouldbe curtailedas therateof returnon humancapitalwould
declineand fallbelow therateson alternative investments. In fact,ratesofreturn to human
capital have not declined over the past century, just as rates on physicalcapital remained
trendless.In theory,theobvious inferenceis thatsecularlygrowingmarketdemandsfor
humancapitalliftedtheratesofreturn upwardas supplygrew,inpartas a responsetorising
demand. The netoutcomewas a fluctuating buttrendlessrateof returnon humancapital
investments.
Industrydemandsforskilled,educated,labor increaseseitherbecause demandforits
servicesand productsincreasesor because its productivity growsas a resultof physical
capitalaccumulation or of technologicalchange.
Whenhumancapitalis viewedas a factorofproduction, coordinatewithphysicalcapital
and "raw"orunskilledlabor,a hypothesis ofcomplementarity betweenphysicalandhuman
capitalimplies growth of demand forhuman capital as a consequence of physicalcapital
accumulation(Griliches,1969). Physicalcapitalaccumulationraisesthemarginalproduct
of humancapital more thanthatof raw labor,producingwage (profitability) incentives
fortheconversionof labor intohumancapital by means of trainingand education. The
accumulationof physicalcapitalis notexogenous,however.Indeed thedemandforboth
physicaland humancapital respondsto opportunities forprofitthatemergefromcost-
and
reducing productinnovating in
changes technology.
Secular growthof demandforhumancapital,resultingfromskill-biasedtechnological
change(NelsonandPhelps,1966) orfromphysical-human capitalcomplementarities, offers
a plausibleresolutionoftheapparentpuzzle of trendlessratesofreturnon educationin the
face of continuousupwardtrendsin education.
This is notto say thattechnologicalchangeis always skillbiased or thatit is completely
exogenousto the formation of humancapital. Indeed, some of the marketresponsesto
increasedcostsofskilledlaborinputsaretechnologiesthateconomizeon skills. Responses
ofthissorthave notyetbecomeprominent incurrent labormarkets, buthistoricalexamples,
such as theassemblyline,are notrare.
Thankstotheavailabilityofrichmicrodatasetsand someindexesoftechnologicalchange
at thesectorallevel,ithas becomepossibleto testthehypothesis thatthepace oftechnology
affectsthedemandforhumancapital,usingU.S. datacoveringthepasttwoorthreedecades.
Changes in technologyare difficult to measure,so thetestsare largelyindirect.They use
contributing factorssuch as R&D intensity or consequencessuchas growthofproductivity
as demandshifters.
Usinga varietyofmicrodatasets,LillardandTan (1986) as well as Barteland Sicherman
(1995) founda greaterincidenceof trainingin industrieswhose productivity growthwas
fastest.Barteland Lichtenberg(1987) reportthat,based on census data, relativelymore
educatedworkerswere employedin those manufacturing industries(in 1960, 1970, and
1980) wherecapital equipmentwas newerand researchand development(R&D) expen-
dituresweremore intensive.Extendingthecensus data to all broadlydefinedindustries
(eighteensectors),Gill (1989) observedgreaterutilizationofeducatedworkersand steeper
wage profilesin sectorswithmorerapiddecade-longproductivity growth.
38 MINCER

I testedthehypothesisthatrecenttechnologicalchange is biased towardhumancapital

(Mincer, 1993b) on the eighteenU.S. industrialsectors,using annual PSID data of the
male laborforcein 1968 through1987,and Jorgenson-Fraumeni productivitygrowth(PG)
indexes12forthe period 1960 through1985. The use of decade long averages forthe
cross-sectionsof theseindexesreducesmuchof theyear-to-year
intersectoral errortypical
of suchresiduals.
Consistentwiththeskill bias hypothesis,thePSID data show thata morerapidpace of
technologicalchangein a sector(indexedbyPG) generatesa greaterdemandforeducation
and trainingof thesectoralworkforce;as evidencedby thefollowing:

• The shareof educatedworkersand theuse of trainingis greaterin thesector.

• (in percentterms)are largerwithinsectorswithrapid

Educationalwage differentials
growth.
productivity
• Mobilityofeducatedand,especiallyofyoung,workersintothesesectorsis observable
and appearsto erodemuchof theeducationalwage gainsoverthecourseof a decade.

• Wage profilesare steeperin progressivesectors,as incidenceof trainingis greaterin

them.

• Separationratesincreasein theshortrun. They decline in the long run,presumably

because trainingintensifies.

All thesefindingscan be viewedas responsesof firmsand workersto skill-biasedtech-

nological change. This is trueof theutilizationand wage effectsand, withan additional
assumption, oftheturnover effects.Thatadditionalassumptionis a degreeoffirmspecificity
in traininginvestments necessitatedbychangingtechnology, or moreprecisely,significant
employerinvestments in such training.
In anotherstudy(Mincer and Higuchi, 1988) we showed thatthe differencebetween
the UnitedStates and Japanin ratesof technologicalchange (measuredby sectoraland
nationalJorgenson typetotalproductivity growthindexes)can explainwhywage structures
and turnoverratesdifferacross sectorsand betweenthe two countries. The remarkably
low turnover rate in Japanviewed as "lifetimeemployment"is frequently describedas a
reflectionof a culturethatputsgreatemphasison grouployalty.Yet in the same culture,
turnoverrateswere a greatdeal higherpriorto WorldWar II. The difference appears to
be an effectof the remarkablyrapid technologicalprogressin Japansince 1950. This
technologicalcatch up requiredsizable investments in humancapital,in schools, and in
enterprises.The phenomenalgrowthofeducationalattainments inJapaninrecentdecades is
well known. The even more intense effortto adapt,train, and workersforcontinuous
retrain
rapid technologicalchanges is not visible in available data. However,effectsof training
on life-cyclewage growthand on turnover ratesare visible in the negativerelationship
betweenthe two withinindustrialsectorsobservedin Japanand in the United States.
In bothcountries,industrieswithmorerapid growthhad bothsteeperwage profilesand
lowerturnover rates. Indeed,usingtheparameters of thoserelations,a rateof productivity
growthinJapanthatwas fourtimesthatintheUnitedStatesintheperiodfrom1960 to 1980
predictedratherwell the over threefold steeperwage profilesand the less thanone-third
 ANDGROWTH
ECONOMICDEVELOPMENT OF HUMANCAPITAL 39

frequency offirmseparationsinJapan.Somewhatweakerbutquitepronounceddifferences
of the same sortwere observedin a comparisonof Americanand Japaneseplantsin the
UnitedStates- thatis, in thesameculturalenvironment. Here themuchlargerinvestments
in trainingand screeningof workersin theJapaneseplantsweremoredirectlyobservable.
Positivecross-sectionalassociationsbetweenthepace oftechnologicalchangeina sector
and indexesof relativedemandforhumancapitaldo not,bythemselves,establisha causal
relationship nor thedirectionof causality,as articulatedin the hypothesisof skill-biased
technology.To resolvethepossibledoubtsthatmay attachto the interpretation based on
cross-sections,a companiontime-series analysiswas undertaken as thenextstep.
The time-seriesanalysisof annualaggregatesover a recenttwenty-five-year periodis
providedin Mincer(1993c). This studyfocuseson thedramaticchangesin wage differ-
entialsby educationand by experienceduringtheperiodfrom1963 through1987. Both
are,in part,indicatorsof thepayoffsforskill,or of ratesof returnon
sets of differentials
humancapital investments.Fluctuationsin themare the outcomeof changesin relative
suppliesofeducatedand experiencedworkersand in relativedemandsforthem.Bothrel-
ativesupplyand relativedemandvariablesare broughtto bear in equationsthat"explain"
thetimeseriesof wage differentials. The findingsshownin Table 4 substantially confirm
thecross-sectional results:

• The year-to-year (betweencollege andhighschoolgrad-

educationalwage differentials
uates) are verycloselytrackedby relativesuppliesof graduatesin (roughly)theirfirst
decade of workexperienceandbychangesin demandformoreeducatedworkers.The
latteris indexedbyresearchanddevelopmentexpenditure peremployee(RDE) as well
as by trendsin serviceemployment (RSG) relativeto goods producingemployment.
Of these,RDE accountsformostof theexplanatorypower.

• Withthedeclineof averageproductivity growthand thenearcessationof averagereal

wage growthsince theearly1970s, theskill-biasedchangesin demandtooktheform
of increasesin demandforworkerswithpostsecondaryeducationand decreases in
demandforworkersat lowereducationlevels. The decline in demandforworkersat
lowereducationallevelsis attributed by some analysts(see Murphyand Welch,1989)
to thegrowthof worldtrade:importsand exportsin U.S. trademorethandoubledas a
percentageofGNP between1960 and 1990. As importcompetingindustries tendto be
less skillintensivethismayhave led to a reductionin wages of less skilledworkers.13
In myregression findings (Table 4) theeffectofthenetbalance of tradevariable(RNE)
on theskill wage gap is significant butquite small whensubstituted forresearchand
development(RDE). It is notsignificant when added to theRDE variable.

• Changesinage distributions(cohorteffects)account,inpart,fortheobservedsteepening
oftheexperienceprofileofwages inthe1970s: increasedproportions ofyoungworkers
("babyboomers")reducedtheirwages relativeto olderworkers.14 Theydo notaccount
forthesteepeningof thehighschool profilein the 1980s or forthestabilizationof the
slope ofthecollegeprofilebetweenthe1970s and 1980s. A morecompleteexplanation
forthesteepenedprofilesis providedby additionalvariablesthatreflectthegrowing
of humancapital.
profitability
40 MINCER

Table4. Educational (college- highschool)21963-

wagedifferentials
1987

Variables Coefficients
(1) (2) (3) (4) (5)
Intercept -0.09 -0.59 -0.41 0.06 -0.14
(1.4) (3.4) (4.6) (1.0) (3.5)
RESY_2 -0.065 -0.086 -0.080 0.081 0.002
(2.2) (1.9) (3.0) (1.1) (0.2)
DR_2 -0.20 -0.14
(4.6) (2.7)
PG 1.12 0.45 0.88
(2.2) (1.00) (1.9)
RDE.2 0.00024 0.00025
(12.3) (9.0)
RNE -0.011
(4.5)
RSG 0.088 0.044
(4.1) (3.5)
EQ 0.000064 0.000028
(3.4) (2.1)
R2 0.69 0.80 0.91 0.75 0.89

Source:Mincer(1993c,Table2).
Notes:t-values
inparentheses. notsignificant.
Excludedvariables
and_3denotea two-year
Subscripts_2 andthree-year
lag.
RESY = Proportionofyoungcollege+graduates amongyoungworkers
1-10years).
(experience
DR = Ratioofyoung(experience lessthanorequaltotenyears)to
totalworkforce.
PG = Totalfactor
productivity
growth (Jorgensonmeasure).
RDE = Researchanddevelopment expenditure perworker.
RNE = Merchandise tradebalanceas a ratiotoGDP.
RSG = Ratioofservicetogoodsproducingemployment.
EQ = Expenditureonnewequipment perworker.
a. Percent betweenmalecollegeandhighschool
wagedifferential
with6-10 yearsofworkexperience.
graduates

• Capital-skillcomplementarityappearsto be at workalongsideskill-biasedchangesin
technology:whennewequipmentperworkeris usedas themeasureofcapitalintensity,
thevariablehas a positiveeffecton theskill wage differential.
It is notclear,however,
whethertheskill bias embodiedin new equipmentrepresentsanythingdifferent than
theeffectof new technology.
ECONOMIC DEVELOPMENT AND GROWTH OF HUMAN CAPITAL 41

The importance ofskill-biased technological changein affecting relative demandsfor

humancapital is invoked in an indirectmanner in a number of micro-level studies15that
attemptto shed lighton the dramatic changes in the U.S. wage structure in the pasttwo
decades.In thesestudiesskill-biased is as a
technology suggested hypothesis consistent
witha variety ofobserved changesat theindustry orplantlevel. Thesechangesinclude
increased utilizationofskilledworkers withina complete arrayof industries andplants
whether ornottheyengageinorcompetewithinternationally tradedgoodsandservices.
The increasein (relative) utilization
of skilledworkers is positively correlated withthe
increasein skillwagegapsacrossindustries andplants.Thisis evidencefora growing
demandforskills.Ifthegrowth ofinternationaltradewerethemajorfactor inreducing
thedemand forunskilled laborin manufacturing wages of unskilled labor would fall,and
itsrelative innonmanufacturing
utilization wouldhavebeenpositively correlated withthe
skillwagegap,buttheopposite correlation
is observed.
A natural corollaryofthedramatic changesin theskillstructure ofwagesinthe1970s
and1980sis inthesubstantial growth inwage(andincome)inequality (as measured by,for
example, thevariance oflogwage),especially inthelatter period.Thewidening inequality
is viewedbysome- perhaps many - observers as an ominous reflectionofa deteriorating
economy andsociety. Ithasstimulated research byeconomists andsociologists.
The sensein whichchangesin wageinequality area corollary ofchangesin skilldif-
ferentialsin wages(byeducation andage) is obvious:whenthesedifferentials change,
totalinequalitychangesinthesamedirection, unlesswithin groupdifferences moveinan
oppositedirection. Thisprovisois intuitivelyimplausible, yetitdidemergeinthe1970s,
as someobservers report:residual(within education andage groups)inequality didnot
narrow,wheneducational shrank.Sinceresidualinequality
differentials is thelarger part
oftotalinequality,resolutionsofpuzzlesaboutchangesinresidualinequality area matter
ofsomeimportance inthedeveloping researcheffort (LevyandMurnane, 1992;Freeman,
1994).

3. HumanCapitalSupplyResponsesto GrowthinDemand

A question ofgreatinterest is whetherthegrowth ofskilldifferentialsinwagesandmore

generally inwageinequality, nowseenforclosetotwodecades,canbe expected toreverse
itself,andifso, howfast.Changesin theage distribution mighthavesomeeffect.As
thebabyboomthatsteepened thewageprofile was followed bya babybust,a flattening
of age profilesmight have been expected, and thisin turnwould havecontributed to a
reduction inequality. Butthisdidnothappenbecausetheageprofile ofwagesis affected
notonlybydemographic changebutalso byskillpremiums, whichroseinthe1980s.The
majorquestion, therefore,is whether thesupply of human capital canbe expected togrow
sufficientlyinresponse tohighratesofreturn so as toeventually reducetheratesofreturn
toa normal levelandso reduceinequality as well.
The supplyresponses areanalyzedin myrecentstudy"Investment in U.S. Education
andTraining" (Mincer, In
1994). analyzing it is
supplyresponses important todistinguish
between stocksandflowsofhuman The
capital. stock of human such
capital, as educational
attainment, exertsan effecton educational
differentialsinwages, whilethe flow,measured
42 MINCER

by enrollments respondsto thewage differentials, or morepreciselyto ratesof return.The

ratherlengthy lag ofthebuildup inthestockofeducationalattainment followingchangesin
theenrollment givesrise to apparentparadoxessuch as thegrowthof educationalsupplies
(attainment) in the 1970s whentheratesof returnwere fallingand thelevelingof supply
when the rateswere risingsteeply. Correctlyunderstood,the 1970s' decline of ratesis
due to theeffectof an increasingstockaccumulatedby growthof enrollment in the 1960s
whenrateswererising.Stocksleveledoffin the 1980s as flowsof enrollment declinedin
the 1970s in responseto decliningrates.Consequentlythegrowthof ratesof returnin the
1980s was due to upwardshifting demand,as is shownin Table 4.
Accordingto humancapital theory,investments in education(school enrollmentsand
participationin training)respondpositivelyto prospectiverates of returnas well as to
parentaleducationand income,and respondnegativelyto tuitioncosts. In Table 5 parental
educationwas used to represent bothinformational and financialadvantagesfacilitating the
educationof children.Since themeasureof theeducationalwage differential, used in the
empiricalanalysisis nota rateofreturn, itmisses thedirect(nettuition)costs of schooling
as a factorwhich is includedin Table 5. The prospectiveeducationalwage premiaare
picturedas theratio(minusunity)of wages of college to highschool graduatesabout a
decade aftergraduation,whichare currently observedby familiesand students.This is
the"overtaking stageof experience,"whichis minimallyaffectedbyjob training(Mincer,
1974).
At all stages- enrollment ratesin Octoberfollowinghighschool graduation,enrollment
ratesof high school graduatesaged eighteento twenty-four, and enrollmentratesof the
population of those to four
eighteen twenty- years old - theresponseto wage premiaand to
parental education was positiveand significant,while tuitionhad a negativeeffect.
The educationalpipelinefrompostsecondaryenrollment to attainment impliesa sizable
lag. The optimallag measuredby themaximalcorrelationin theregressionof attainment
in the youngpopulation(Figure 1) on enrollmentof roughlythe same cohortwas eight
years. This regressionyieldedan R2 = 0.93, whentheproportion of college graduatesin
thetwenty-five to twenty-nine age groupwas regressedon enrollment of theseeighteento
twenty-four years old eightyears before. Similarly,if the dependent variable is thecohort
at six to ten yearsof workingage (years since completionof schooling)the optimallag
is again eightyears,and R2 = 0.89. A slightlyweakercorrelationis obtainedwhen the
cohortaged twentyto twenty-nine is used as therelativesupply(proportion withsixteenor
moreyearsof schooling)variable.
It is this relativesupply variablewhich affectsthe rate of returnnegatively,holding
the demand variableconstant - as is shown in Table 4. Figure 1 shows how well the
enrollment series(lagged eightyears)fitsrelativesupply,by shifting theattainment series
of theyoungpopulationeightyearsback. Enrollmentgrowthin the 1960s producesthe
growthof attainment priorto 1975, while thedecliningenrollment ratein the 1970s leads
to thestagnationin thesupplyin the 1980s. In turn,thegrowthof enrollment in the 1980s
an
predicts increasing relativesupply in the 1990s among the young cohorts, as shownin
theextrapolation of thelowergraphin Figure 1. The predictedincreasein attainment from
1991 to 2000 is, accordingto Figure1, about 8 percentagepoints.
Parameterestimatesof RESY (the effectsof relativesupplyon the educationalwage
 ANDGROWTH
ECONOMICDEVELOPMENT OF HUMANCAPITAL 43

Table5. Enrollment
rates,1967-1990.

Variables PercentofHigh Percent

ofHigh Percent
ofPopulation
SchoolGraduates SchoolGraduates Age 18-24Enrolled
Enrolled
NextOctober Enrolled,
Age 18-24
(1) (2) (3) (4) (5)
Collegewage 2.9 1.3 1.3 0.77 0.77
premium2 (5.1) (3.2) (4.3) (2.8) (3.6)
♦0.45* *0.31* *0.31* *0.23* *0.23*
Parental 3.7 1.2 1.2 1.6 1.6
education5 (3.7) (1.7) (2.3) (3.4) (4.5)
*0.84* *0.42* *0.43* *0.73* *0.74*
Tuition -0.007 -0.002 -0.002 -0.0004 -0.0003
(2.9) (0.96) (1.1) (-0.3) (-0.3)
♦-0.81* *-0.29* *-0.26* *-0.08* *-0.06*
Intercept 27.7 18.8 18.8 3.2 3.2
(3.1) (3.1) (4.1) (0.7) (1.0)
Residualfrom 0.46 0.32
first
regression (3.9) (3.9)
R2 0.75 0.69 0.82 0.79 0.88

Sources:Mincer(1994,Table6). Column(1): Condition ofEducation

(U.S. Department
ofEducation,National
CenterforEducation 1992,Table7-1).
Statistics:
- SocialandEconomicCharacteristics
Columns(2-5): SchoolEnrollment ofStudents
(Current Survey:October,
Population 1992,pp.20-474).
Notes:
arethree-year
Allvariables moving inparentheses;
averages.T-statistics in
elasticities
asterisks.
wagedifferential
a. Percent ofmalecollegeandhighschoolgraduates with6-10 years
ofexperience.
b. Average ofmaleswith26-30 years
schooling
ofexperience.

differentials)in Table 4 implyan elasticityof -0.72 of the wage premiumwithrespect

to the relativesupply. The predictedincrease in attainment of 35 percentin the young
population(8/23 in Figure 1) would therefore reduce the college premiumby about 25
percent.If thecurrent collegepremiumis aboutdouble itsusual (average)level,thesupply
responsewould returnthecollege premiumabout half way towardits long-runaverage
(1957 to 1990) a decade from1993.
In thisscenariooverhalfof theskill shortageswould be eliminatedby theend of the
decade followingtheyear1993. This predictionrelieson supplyeffectsalone and assumes
a decelerationof growthindemandforhumancapitaland indirectcostsofschooling(such
as nettuition)to theirlong-termlevels. Clearly,theadjustment will be slower,ifgrowthof
demanddoes notdecelerate,unlessskill-savingtechnologiesare implemented.
The responseof job trainingto changingdemand forhumancapital can be inferred
indirectlyfromchangingslopes of wage profilesand moredirectlyfromBLS surveysof
the incidenceofjob training.The changingslopes of thewage profileare affectedboth
44 MINCER

Figure1. Percent inthe25-29 Population

ofCollegeGraduates 8 yearversus18-24enrollment
(shifted rate).
Source:Mincer(1994,Figure4).

bychangesin theprofitability
oftrainingandofitsvolumeorincidence.The slopesare
also affected
by demographicchanges:thebabyboomincreased therelativesupplyof
inexperiencedworkersandsteepenedtheratioofwagesofoldertoyoungerworkers given
imperfectsubstitution
between inexperienced workers.In Table6, both
andexperienced
theproportionofyoungworkers inchangingcohortsandtheschooling
wagepremium are
and in the
positive significantaffecting profile's slope.
In addition, from1983and 1991 BLS surveysshowsthattheincidence
information
oftrainingincreased ofeducation
in the1980swhentheprofitability grewstrongly (see
Mincer,1994,Table11).

4. Prospectsand Questions

Theincreasing humancapitalinvestmentsinthe1980scanbe expected toproducehigher

stocksofhumancapitalinthe1990sandbeyond, whichinturncouldreverse thegrowth
ofratesofreturn andofwageinequality at a laterdate,providedthegrowth ofdemand
foreducationandskilledworkersdecelerates.Ifso,estimatesoftheoptimallag between
attainmentandenrollmentandofelasticitiesofratesofreturn withrespecttothesupply
ofhumancapitalstocks,suggesta declineofratesofreturnhalf-waytoward the"normal"
long-runlevelinthenextdecadeorso.
Thesuggested periodofreadjustmentofsupplyandofthewagestructure is expectedto
 ANDGROWTH
ECONOMICDEVELOPMENT OF HUMANCAPITAL 45

Table6. SlopeofWageProfile,
1967-1990

HighSchool College
intercept -0.0165 n.s.
(-2.9)
rs 0.31 0.12
(7.8) (3.6)
♦0.68* *0.27*

DR 0.06 0.06
(5.1) (6.0)
*0.61* *0.76*

u 0.0011 n.s.
(5.2)
*0.17*

R2 0.91 0.60

Source: Mincer(1994, Table 10).

Notes: T-statistics
in parentheses;elasticitiesin asterisks.
rs = college wage premium.
DR = ratioof numbersof workersof 1-10 yearsexperience
to all workerswith1-40 yearsof experience.
u = unemployment ratesforrecenthighschool grads.
n.s. = notsignificant.

be longerthanthedecade-longfluctuations in thepast because theskill-biasedgrowthin

demand,especiallyin thepastdecade, has been verystrong,reflecting thebirthof a new
era of informationand communication technology.
Looking to the future,a morebasic questionremainsconcerningthescope of possible
supplyresponsesto thegrowthindemandforskill. Skillsacquiredat schoolandon thejob
are a functionof thequalityof learningand notmerelyof thetimespentin it. Therefore
a bottleneckin theexpansionof humancapitalsupplymaylie in theinadequatequalityof
learningabsorbedby theworkforce, especiallyat theelementary and secondarylevels of
schooling.
If thisqualitydeteriorated or remainedinadequatein theface of growingtechnological
demandsinthepastdecade ortwo,itmayhavebeen a factorinthewideningandpersistence
ofeducationaldifferentials andininequalitymoregenerally.Evidenceontrendsinqualityof
learning is to
difficult come by,butapprehensionaboutqualitylevelsappearstobe justified
a
by variety of testsand internationalcomparisons.At a deeperlevel qualityproblemsare
not restricted just to schooling. They startwithchildhooddevelopmentbeforeentering
school. Humancapitalinadequaciesat homeand in earlyschoolingare likelyto affectthe
efficiency of humancapitalinvestments. Therefore,qualitybottlenecksare noteffictively
overcomeby thesubstitution of trainingforschooling: theneeds forremediation increase
thecost of trainingand are likelyto reducejob trainingas well.
46 MINCER

5. ChildhoodHumanCapital: Progressor Impediment?

In thepastthedivisionof laborwithinthefamilymadethefamily economically inter-

dependent and therefore more stable.The growth of real wages, the declineof fertility,
andtheimprovements in healthandlifeexpectancy aresomeofthefactors generated by
economicgrowth thatledtothegrowth ofwomen 's labormarket participationandmarket
careerorientation. The consequence is a considerable reduction in thedivisionof labor
within thefamily. Thegreater economicindependence ofspouses(current orprospective)
maywellgenerate increasing marital separation andturnover. I indicated beforethatthis
development inturn augments women'sincentives, onprecautionary orinsurance grounds,
toincreasetheirinvestment inthemselves. Buttheeffects on theinvestment inthehuman
capitalofchildren areuncertain: eventhough greater humancapitalinvestments perchild
aretheoutcome ofthedemographic transitionandcontinue torisewithgrowing technology,
deteriorationis likelytoarisefromgrowing family instability. The latteris reflected not
in
only highseparation rates. of
Postponementsmarriages and reduction of marriage rates
as wellas growing cohabitation andnonmarital births areother manifestations ofprofound
changesin family structureexperienced in theadvancedcountries ofNorthAmericaand
Western Europe.
Do thesenewandgrowing family structures represent a viableadaptation totheconse-
quencesofeconomicgrowth, oraretheysymptoms ofdecaycreated byeconomicgrowth?
The implications forthehumancapitalof thelargeproportion ofchildren livingwith
one or one are
only parent only biologicalparent problematic. Recent studies(McLanahan
andSandefur, 1994)showthatchildren growing up insingle-parent households aretwice
as likelyto dropoutof highschool,to be unemployed, andto becometeenageparents
themselves. After separation, thesingleparent household losesabout40 percent offamily
income,children lose mostof theircontactwithfathers, whilegrowing proportions of
singlemothers areawayatworkmostoftheday.Evenwhenincomeandethnicity areheld
constant,children in single-parent households arelikelyto suffer theconsequences of a
reducedhumancapitalpotential (Dawson,1991).
Sincehuman capitalisa factorinproducing additions tohuman capital(Ben-Porath, 1967;
Becker1975),thedisadvantages ofanimpoverished earlyhumancapitalstockaccumulate
overa lifetime.16 Although therepercussions offamily instability aremostpronounced in
thepoorpopulation, theproportion ofpopulation in poverty has notgrownsignificantly
in thepasttwoorthreedecades,whilethegrowth offamily instability hasbeenrapidin
mostoftheadvancedeconomiesinthatperiod.17 Is therea dangerthateconomicgrowth
is carryingseedsofitsowndestruction? ThisSchumpeterian thought maybe as wrongas
itspredecessor, butmoreresearch willbe required toevaluatethenatureanddimensions
oftheproblem andsomepolicieswillbe neededtodealwithit.

Acknowledgments

Helpfulcomments werereceivedfromD. Bloom,R. Findlay,B. Jovanovic,

E. Zupnick,
andananonymous reviewer.Competent assistance
research byO. Azfarand
wasprovided
P. Ranjan.NSF support
is gratefully
acknowledged.
 ANDGROWTH
ECONOMICDEVELOPMENT OF HUMANCAPITAL 47

Notes

growsfasterthanindustrialproductivity,
1. If agriculturalproductivity the demand forfarmlabor is stilllikely
to decline,giventhelow incomeand priceelasticities.
2. See Rosenzweig ( 1994) foran instructive
analysis of theeffectsof the"greenrevolution"in India.
3 . For a comprehensivesynthesissee Becker ( 198 1) and T. P. Schultz (1981).
4. Historiansalso stresstherelevanceof publichealthmeasuresas a factorindependentof income. This pointis
probablymoreapplicable to thecurrentexperienceof less developed countries.
5. Costs decline because fewerbirthsare needed to produce a survivor.
6. Rates of populationgrowthin LDCs began a decline as early as the 1960s. Fertilityratesdeclined over 50
percentsince then(T. P. Schultz,1994).
7. This was firstpointedout by O'Hara( 1972).
8. This descriptionof thedemographictransition as a nonlineareffectofeconomic growthon populationgrowth
casts doubt on attemptsto analyze economic growthas an effectof populationgrowth: the same rate of
populationgrowthcorrespondsto low and highlevels of income,dependingon thestateof thedemographic
transition.
9. The firstanalysis by Mincer (1962) used a price-theoretic
approach and was applied to theU.S. experience.
Becker (1965) contributeda theoreticalframeworkthat utilizes the concept of the "household production
function."Goldin's book (1990) coverstheU.S. historyin greatdetail.
10. For a detailedanalysissee Becker (1965) and Mincer(1962).
11. Voluminousevidence is citedin T. W. Schultz(1975b) and Becker (1981).
12. The Jorgenson-Fraumeni indexescontainmeasuresof quantityand of "quality"of laborinputs.The latterare
based on education,age, and sex of theworkforce.The productivity growthresidualsare, therefore,largely
purgedof human capital components. This ensures thatthereis no spurious correlationin the empirical
relationsbetweenproductivity growthand humancapital.
13. See articlesin Kosters(1994) and a reviewby Burtless(1995). Based on micro-levelstudies,describedbelow,
mosteconomistsdoubtthatthegrowthof tradehad much of an effect,if any,on the decline of less skilled
wages.
14. See Welch (1979) fortheanalysisof cohorteffects.
15. For comprehensivereviews see Levy and Mumane (1992) and Freeman (1994). No directmeasures of
technologyare available exceptfora studyof computeruse and its effectsby Krueger(1993).
16. Lesser additionsto humancapitaltranslateintoflatter
wage profiles.
17. Ifthewelfaresystemis a factorin thedisintegration
of poor families,itscontribution
to theproblemmayhave
actuallydiminishedin thepast two decades as welfarebenefitsdeclinedin the UnitedStates.

References

Bartel,A., and F. Lichtenberg.(1987). 'The ComparativeAdvantageofEducated Workersin Implementing New

Technology."ReviewofEconomicsand Statistics69, 1-1 1.
Bartel, A., and N. Sicherman. (1995). 'Technological Change and the Skill Acquisitionof Young Workers."
NBER workingpaper5107, May.
Becker,G. S. (1965). "A Theoryof Allocationof Time." Economic Journal75, 493-517.
Becker,G. S. (1975). Human Capital, (2nd ed). Chicago: Universityof Chicago Press.
Becker,G. S. (1981). Treatiseon theFamily.Cambridge,MA: HarvardUniversityPress.
Becker, G. S., and H. G. Lewis. (1973). "On the InteractionBetween the Quantityand Qualityof Children."
JournalofPolitical Economy81, S271-S288.
Becker,G. S., K. Murphy,and R. Tamura.(1990). "Human Capital,Fertility, and Economic Growth."Journalof
98, 12-37.
PoliticalEconomy
48 MINCER

Ben-Porath,Y. (1967). "Productionof Human Capital and the Life-Cycle of Earnings." Journalof Political
Economy75, 352-365.
Burtless,G. (1995). "InternationalTrade and EarningsInequality."JournalofEconomic Literature33, 800-816.
Dawson, D. A. (1991). "Family Structureand Children'sHealth and Well-Being." JournalofMarriage and the
Family53. 573-584.
"
Freeman,R. B. (1994). "ProgramReporton Labor Studies NBER Reporter(Fall), 1-5.
I.
Gill, (1989). 'Technological Change,Education, and Obsolescence ofHumanCapital." Ph.D. thesis,University
of Chicago.
Goldin, C. (1990). UnderstandingtheGender Gap. Oxford: OxfordUniversityPress.
Griliches,Z. (1969). "Capital-Skill Complementarity."Reviewof Economicsand Statistics51, 465-478.
Johnson,W. R., and J.Skinner.(1986). "Labor Supply and MaritalSeparation."AmericanEconomic Review76,
455-469.
Jorgenson,D., F. Gollop, and B. Fraumeni. (1990). Productivity and the U.S. Economic Growth. Cambridge,
MA: HarvardUniversityPress. Updated series, 1990.
Katz, L., and K. Murphy. (1992). "Changes in Relative Wages, 1963-1987." QuarterlyJournalof Economics
107, 35-78.
Kosters,M. (ed). (1994). Trade and Wages. Washington,DC: AmericanEnterpriseInstitute.
Krueger,A. (1993). "How ComputersHave Changed theWage Structure."£)uarte/7y Journalof Economics 108,
33-60.
Levy, F, and R. J. Murnane. (1992). "U.S. Earnings Levels and EarningsInequality." Journalof Economic
Literature30, 1333-1381.
Lillard,LMand H. Tan. (1986). Training: WhoGetsIt and WhatAreIts Effects?SantaMonica: Rand Corporation.
Lucas, R. E. (1988). "On theMechanics of Economic Development" JournalofMonetaryEconomics 22, 3-22.
McLanahan, S., and G. Sandefur.(1994). Growingup witha Single Parent.Cambridge,MA: HarvardUniversity
Press.
Mincer,J. (1962). "Labor Force Participationsof Married Women." In H. G. Lewis (ed.), Aspects of Labor
Economics. Princeton,NJ: PrincetonUniversityPress.
Mincer,J. (1993a). "Education and Unemploymentof Women." In Studies in Labor Supply. Elgar Aldershot,
England.
Mincer,J. (1993b). "Human Capital Responses to Technological Change in the Labor Market." In Studies in
Human Capital. Elgar.
Mincer,J.(1993c). "Human Capital, Technology,and theWage Structure."In Studies in Human Capital. Elgar.
Mincer,J.(1974). Schooling,Experience,and Earnings. New York: Columbia UniversityPress.
Mincer,J.(1994). "Investmentin U.S. Education and Training."NBER workingpaper4844, August.
Mincer,J.,and T. Higuchi. (1988). "Wage Structuresand Labor Turnoverin the U.S. and in Japan." Journalof
theJapanese and InternationalEconomics 2, 97-133.
Murphy,K., and F. Welch. (1989). "Wage PremiumsforCollege Graduates."Educational Researcher 12-17.
Nelson, R., and E. Phelps. (1966). "Investmentsin Humans, TechnologicalDiffusion,and Economic Growth."
AmericanEconomicReview56, 69-75.
O'Hara, D. I. (1972). Changes in Mortalityand FamilyDecisions RegardingChildren.Santa Monica, CA: Rand
Corporation.
Romer,P. (1986). "IncreasingReturnsand Economic Growth."Journalof Political Economy94, 1002-1037
Rosenzweig,M. R. (1994). "Human Capital Accumulation,theFamily,and Economic Development.' In Human
Capital and Economic Development.Kalamazoo, MI: Upjohn Institute.
Schultz, T. W. (ed.). (1975a). "The Abilityto Deal withDisequilibria." Journalof Economic Literature13,
827-846.
Schultz,T. W. (ed.). (1975b). Economics of theFamily. NBER, Chicago UniversityPress.
Schultz,T. P. (1981). Economics ofPopulation. Reading,MA: Addison-Wesley.
Schultz,T. P. (1994). "Human Capital, Family Planning,and TheirEffectson PopulationGrowth. AEA Papers
and Proceedings84, 255-260.
Welch,F. (1970). "Education in Production."JournalofPolitical Economy78, 278-282.
Welch,F. (1979). "Effectsof CcohortSize on Earnings."Journalof PoliticalEconomy87, S65-S97.