Skip to main content

Human Capital

  • Reference work entry
  • First Online:
Handbook of Cliometrics


Human capital is the stock of skills that the labor force possesses. The flow of these skills is forthcoming when the return to investment exceeds the cost (both direct and indirect). Returns to these skills are private in the sense that an individual’s productive capacity increases with more of them. But there are often externalities that increase the productive capacity of others when human capital is increased. This essay discusses these concepts historically and focuses on two major components of human capital: education and training, and health. The institutions that encourage human capital investment are discussed, as is the role of human capital in economic growth. The notion that the study of human capital is inherently historical is emphasized and defended.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Institutional subscriptions

Similar content being viewed by others


  1. 1.

    Fisher cites J.S. Nicholson, “The Living Capital of the United Kingdom,” for the term “living capital” as opposed to “dead capital.”

  2. 2.

    A Google “N Gram” of the term “human capital” reveals that there was virtually no usage in the English language until the late 1950s. After the 1950s the usage of the term increased until today, with a somewhat greater uptick in the 1990s than previously.

  3. 3.

    For an understanding of the “residual” in economic growth, see the original Solow (1957) article or an economic growth theory textbook such as Barro and Sala-i-Martin (2003).

  4. 4.

    See the calculations in Robert Gallman’s chapter in Davis et al. (1972) and those in Denison (1962).

  5. 5.

    The calculation is larger in Denison’s work than in Goldin and Katz (2008). But both of these are a lower bound for a host of reasons including the endogenous nature of capital and, most importantly, the externalities from having a more educated workforce and population.

  6. 6.

    The data needed to assess this point are very thin and consist of earnings for various occupations.

  7. 7.

    See Goldin and Katz (2008, Table 1.3).

  8. 8.

    Hippocrates left records of this finding.

  9. 9.

    Mark Twain provides a similar answer in A Connecticut Yankee in King Arthur’s Court.

  10. 10.

    Fogel (1989) provides a definitive treatment of the subject.

  11. 11.

    See Goldin (1976) on slavery in US cities from 1820 to 1860.

  12. 12.

    The figure for the United States beginning with 1880 includes the South and all races. Thus, the underlying data are even higher for the white population and that outside the US South, which had and still has lower schooling rates than the North and the West.

  13. 13.

    Although most were “common” school districts, a large fraction was fiscally independent. There are about 16,000 largely independent school districts today. See Goldin and Katz (2008), Chapters 3 and 4.

  14. 14.

    On the quantity and quality of education for African-Americans and whites in US history, see Card and Krueger (1992a). A related article of theirs (Card and Krueger 1992b) shows that the quality of schools, as measured by pupil/teacher ratios, average term length, and teacher salaries, positively affects rates of return to education at the state level.

  15. 15.

    Many places have added two other transitions: preschool to kindergarten and middle school or junior high school to high school.

  16. 16.

    Goldin and Katz (2008), Chaps. 4 and 5

  17. 17.

    This result is given in Goldin and Katz (2008), Table 2.5.

  18. 18.

    For a discussion of higher education in the United States, see Goldin and Katz (1999, 2008).

  19. 19.

    For example, state equalization plans have restricted the degree to which separate districts can raise funds, and states have transferred resources to poorer districts. States have passed more stringent high school graduation standards, and “No Child Left Behind,” passed in 2002, has forced states to have higher standards at all grades.

  20. 20.

    See Weil (2007) for a clever way to separate the effects of health on income from the reverse causality.

  21. 21.

    The division among the three phases is the author’s, not necessarily that of the various contributors to the literature.

  22. 22.

    On the changing relationship between health and economic development, see Preston (1975).

  23. 23.

    See Cutler et al. (2006), Fig. 3 for US data and Floud et al. (2011), Fig. 4.5 for England and Wales.


  • Acemoglu D, Johnson S, Robinson J et al (2002) Reversal of fortune: geography and institutions in the making of the modern world income distribution. Quart J Econ 117:1231–1294

    Article  Google Scholar 

  • Allen R (2001) The great divergence in European wages and prices from the middle ages to the first world war. Explorat Econ Hist 38:411–447

    Article  Google Scholar 

  • Almond D (2006) Is the 1918 influenza pandemic over? Long-term effects of in utero influenza exposure in the post-1940 U.S. Population. J Polit Econ 114:672–712

    Article  Google Scholar 

  • Barro R, Sala-i-Martin X (2003) Economic growth, 2nd edn. MIT Press, Cambridge, MA

    Google Scholar 

  • Becker G (1962) Investment in human capital: a theoretical analysis. In: NBER special conference 15, supplement to J Polit Econ 70(5), part 2, pp 9–49

    Google Scholar 

  • Becker G (1964) Human capital: a theoretical and empirical analysis, with special reference to education. Harvard University Press, Cambridge, MA

    Google Scholar 

  • Bleakley H (2007) Disease and development: evidence from hookworm eradication in the American South. Quart J Econ 122:73–117

    Article  Google Scholar 

  • Card D (1999) The causal effect of education on earnings. In: Ashenfelter O, Card D (eds) Handbook of labor economics, vol 3A. Elsevier/North Holland, Amsterdam

    Google Scholar 

  • Card D, Krueger A (1992a) School quality and black-white relative earnings: a direct assessment. Quart J Econ 107:151–200

    Article  Google Scholar 

  • Card D, Krueger A (1992b) Does school quality matter? Returns to education and characteristics of public schools in the United States. J Polit Econ 100:1–40

    Article  Google Scholar 

  • Carter SB, Gartner SS, Haines MR, Olmstead AL, Sutch R, Wright G (2006) Historical statistics of the United States, Millennialth edn. Cambridge University Press, Cambridge

    Google Scholar 

  • Clark G (2005) The condition of the working-class in England, 1209–2004. J Polit Econ 113:1307–1340

    Article  Google Scholar 

  • Clark G (2007a) A farewell to alms: a brief economic history of the world. Princeton Press, Princeton

    Google Scholar 

  • Clark G (2007b) The long march of history: farm wages, population and economic growth, England 1209–1869. Econ Hist Rev 60:97–136

    Article  Google Scholar 

  • Clark G (2009) The macroeconomic aggregates for England, 1209–2008. University of California, Davis, Economics WP, 09-19

    Google Scholar 

  • Cutler D, Miller G (2005) The role of public health improvements in health advances: the twentieth-century United States. Demography 42:1–22

    Article  Google Scholar 

  • Cutler D, Deaton A, Lleras-Muney A et al (2006) The determinants of mortality. J Econ Perspect 20:97–120

    Article  Google Scholar 

  • Davis LE, Easterlin RA, Parker WN et al (1972) American economic growth: an economist’s history of the United States. Harper and Row, New York

    Google Scholar 

  • Denison EF (1962) The sources of economic growth in the United States and the alternatives before us. Committee for Economic Development, New York

    Google Scholar 

  • Easterlin R (1981) Why isn’t the whole world developed? J Econ Hist 51:1–19

    Article  Google Scholar 

  • Engerman SL, Sokoloff KL (2012) Economic development in the Americas since 1500: endowments and institutions. Cambridge University Press, Cambridge

    Google Scholar 

  • Epple D, Romano RE (1996) Ends against the middle: determining public service provision when there are private alternatives. J Public Econ 62:297–325

    Article  Google Scholar 

  • Fisher I (1897) Senses of ‘Capital’. Econ J 7:199–213

    Article  Google Scholar 

  • Floud R, Fogel RW, Harris B, Hong SC et al (2011) The changing body: health, nutrition, and human development in the Western World since 1700. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Fogel RW (1989) Without consent or contract. W.W. Norton, New York

    Google Scholar 

  • Fogel RW (1997) New findings on secular trends in nutrition and mortality: some implications for population theory. In: Rosenzweig MR, Stark O (eds) Handbook of population and family economics. Elsevier/North Holland, Amsterdam, pp 433–481

    Chapter  Google Scholar 

  • Fogel R (2004) The escape from hunger and premature death: 1700–2100: Europe, America, and the third world, Cambridge studies in population, economy and society in past time. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Galenson D (1984) The rise and fall of indentured servitude in the Americas: an economic analysis. J Econ Hist 44:1–26

    Article  Google Scholar 

  • Galor O (2011) Unified growth theory. Princeton University Press, Princeton

    Google Scholar 

  • Galor O, Weil D (2000) Population, technology, and growth: from the Malthusian regime to the demographic transition. Am Econ Rev 90:806–828

    Article  Google Scholar 

  • Goldin C (1976) Urban slavery in the American South, 1820 to 1860: a quantitative history. University of Chicago Press, Chicago

    Google Scholar 

  • Goldin C (2001) The human capital century and American leadership: virtues of the past. J Econ Hist 61:263–291

    Article  Google Scholar 

  • Goldin C, Katz LF (1999) The shaping of higher education: the formative years in the United States, 1890 to 1940. J Econ Perspect 13:37–62

    Article  Google Scholar 

  • Goldin C, Katz LF (2008) The race between education and technology. Belknap, Cambridge, MA

    Google Scholar 

  • Goldin C, Katz LF (2011a) Putting the ‘Co’ in education: timing, reasons, and consequences of college coeducation from 1835 to the present. J Hum Cap 5:377–417

    Article  Google Scholar 

  • Goldin C, Katz LF (2011b) Mass education and the state: the role of state compulsion in the high school movement. In: Costa D, Lamoreaux N (eds) Understanding long run economic growth. University of Chicago Press, Chicago, pp 275–311

    Chapter  Google Scholar 

  • Goldin C, Margo RA (1992) The great compression: the wage structure in the United States at mid-century. Q J Econ 107:1–34

    Article  Google Scholar 

  • Jayachandran S, Lleras-Muney A, Smith KV et al (2010) Modern medicine and the twentieth century decline in mortality: new evidence on the impact of sulfa drugs. Am Econ J Appl 2:118–146

    Article  Google Scholar 

  • Jones CI, Romer P (2010) The new kaldor facts: ideas, institutions, population, and human capital. Am Econ J Macroecon 2:224–245

    Article  Google Scholar 

  • Kremer M (1993) Population growth and technological change: one million B.C. to 1990. Q J Econ 108:681–716

    Article  Google Scholar 

  • Lindert P (2004a) Growing public: social spending and economic growth since the eighteenth century. The story, vol 1. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Lindert P (2004b) Growing public: social spending and economic growth since the eighteenth century. Further evidence, vol 2. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Mankiw G, Romer D, Weil D (1992) A contribution to the empirics of economic growth. Q J Econ 107:407–438

    Article  Google Scholar 

  • McKeown T (1976) The modern rise of population. Academic, New York

    Google Scholar 

  • Mincer J (1958) Investment in human capital and personal income distribution. J Polit Econ 66:281–302

    Article  Google Scholar 

  • Mokyr J (2004) Gifts of athena: historical origins of the knowledge economy. Princeton University Press, Princeton

    Google Scholar 

  • Preston SH (1975) The changing relation between mortality and level of economic development. Popul Stud 29:231–248

    Article  Google Scholar 

  • Preston SH (1996) American longevity, past, present, and future, Policy brief no. 7. Center for policy research. Maxwell School, Syracuse University, Syracuse

    Google Scholar 

  • Schultz TW (1961) Investment in human capital. Am Econ Rev 51:1–17

    Google Scholar 

  • Smith A (2003; orig. publ. 1776) An inquiry into the nature and causes of the wealth of nations, Book 2. Bantam Classic, New York

    Google Scholar 

  • Sokoloff KL, Engerman SL (2000) History lessons: institutions, factor endowments, and paths of development in the new world. J Econ Perspect 14:217–232

    Article  Google Scholar 

  • Solow R (1957) Technical change and the aggregate production function. Rev Econ Statist 39:312–320

    Article  Google Scholar 

  • Weil D (2007) Accounting for the effect of health on economic growth. Q J Econ 122:1265–1306

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations


Corresponding author

Correspondence to Claudia Goldin .

Editor information

Editors and Affiliations

Rights and permissions

Reprints and permissions

Copyright information

© 2016 Springer-Verlag Berlin Heidelberg

About this entry

Cite this entry

Goldin, C. (2016). Human Capital. In: Diebolt, C., Haupert, M. (eds) Handbook of Cliometrics. Springer, Berlin, Heidelberg.

Download citation

Publish with us

Policies and ethics