On the concept and dimensions of human capital in a knowledge-based economy context

Technological changes, along with the globalization of markets, are transforming industrial countries into knowledge-driven economies. This shift has made human capital one of the leading public policy themes. However, existing measures of investment do not allow policymakers to comprehend fully the implications of human capital on economic performance and technological advancement. This paper discusses the elements of a comprehensive definition of human capital and identifies the fundamental differences between human and physical capital. It shows that the main features of human capital and its differences with physical capital have implications for national income accounting, the classification of government expenditures, and the endogenous growth literature.