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Human Capital

The human capital model was first developed in the 1960s by Gary Becker and Theodore Schultz and is used to explain both the amount of schooling an individual receives as well as the amount of on-the-job training an individual receives after leaving school. The theory of human capital involves individuals investing in education and training. Such investments lead to an increase in individuals’ skills and their productivity in the labor market. This in turn leads to higher wages and earnings. This entry first discusses the basic model of human capital. Next, reinterpretations of the model are examined, after which more recent elaborations of the theory are touched on. Finally, some limitations of the theory are discussed.

This entry focuses only on human capital theory as applied ...

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