Notes

^1.

Economic value based on market prices may be quite different from inherent value based on other concepts.

^2.

Assigning a price to human effort as a value accords with the normal practice of the National Accounts which uses the prices of products that are exchanged in markets to value relative worth.

^3.

Jorgenson and Fraumeni assume that human capital such as skills, knowledge and competencies embodied in an individual with a given gender, education and age group does not change over time. To account for such change in the 'quality' of human capital in an individual would require the use of hedonic methods as in the estimation of price indices for computers and semiconductors (Wei 2008).

^4.

In this approach, no deduction is made for the maintenance of labour. This allows the income stream derived from labour to be compared to the income stream from other assets like physical and natural capital.

^5.

For a discussion of this concept, see Gu et al. 2003.

^6.

The end years are arbitrarly chosen. While the average earnings of 74 year olds are not exactly zero, they are very close to zero and changing the limits will have a very small effect on the estimates produced here.

^7.

Schreyer (2001) provided a detailed discussion about the conceptual issues of discount rate.

^8.

Specifically, we made the following assumptions about school enrolment: For an individual with education level 4 and enrolled in school, he or she is assumed to be in the first year of study if he or she is less than or equal to 22 years of age, in the second year if he or she is 23, and in the first and second year with equal probability if he or she is 24 or older. For an individual with education level 3 (some post-secondary education) and enrolled in school for bachelor's degree, he or she is assumed to be in the first year of study if he or she is less than or equal to 20 years of age, in the second year if he or she is 21, and in the first, and second years with equal probability if he or she is 22 or older. For an individual with education level 2 and enrolled in school, he or she is assumed to be in the first year of study if he or she is 15, and in the first and second year with equal probability if he or she is 16 or older. For an individual with education level 1 and enrolled in school, he or she is assumed to be in the first, second and third years of study with equal probability. In our empirical analysis, we find that this change to the assumption of even distribution of students across different school years has little effect on the estimated stock of human capital for Canada.

^9.

Diewert (1976) shows that the Tornqvist index is an exact superlative index number.

^10.

We did not collect data on immigration for this paper and will not estimate the separate effect of immigration and education on human capital investment.

^11.

In keeping with the National Accounts, only unincorporated self employed are considered in this category.

^12.

Censuses provide data on mixed income of self-employed workers that include both labour income and capital income.

^13.

Labour compensation, as defined for the productivity program, includes all payments in cash or in kind that Canadian producers make to workers in return for their services. It includes labour income such as wages and salaries (including bonuses, tips, taxable allowances and back pay), supplementary income of paid workers (various employer contributions) and the implicit labour income of self-employed workers.

^14.

Boothby et al. (2003) discussed the effect of the aging of the Canadian population on the skill level of the working-age population in Canada.

^15.

The revaluation and change in human capital stock was also minimal in the 1970s. This was probably because of the entry of younger workers and women into the labour force.

^16.

The annual growth rates of gross investment, depreciation and revaluation in current dollars were 4.7%, 5.8%, and 4.3% respectively over the period (Table 8).

^17.

The data on investment and GDP were obtained from the income and expenditure accounts of Canada from Statistics Canada (CANSIM table 380-0017).

^18.

In the systems of national accounts proposed by Jorgenson and Fraumeni that include the accumulation of human capital, GDP needed to be adjusted to include investment in human capital. When this was done, the ratio of human capital investment to the adjusted GDP was 0.55 in 1971 and 0.31 in 2007.

^19.

The National Balance Sheets Accounts of Statistics Canada are presented in current prices only. We have used the price deflators of capital stock for residential and non-residential assets to deflate the stock of produced assets in the National Balance Sheets. The price deflator for natural wealth was not available. As such, we only compared the growth rates of human capital and produced capital.

^20.

Wei (2004) also found that changes in real income growth rate and discount rate had a significant effect on the level of human capital stock.