Human capital in Britain, 1760–2009

ABSTRACT

Human capital can be defined as the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being. It is arguably one of the most important determinants of economic growth. In general, human capital has been calculated with two different approaches: (1) retrospective method through the expenditures on education, (2) prospective through the discounted sum of the wages it would receive over the expected number of remaining working years. In this paper we use the prospective method to calculate human capital in the UK from the mid-eighteenth century to the present, providing the by far longest estimate for human capital for any country. To overcome the problems related to the scarcity of historical data, we developed a method which is able to make the most efficient use of the scarce data available for the eighteenth and nineteenth centuries. Our calculations show a 112-fold increase of human capital, and a 13-fold increase of human capital per worker and per capita from 1760 to 2009. Using cumulative schooling expenditures from 1833 to 2000, we examine whether increased spending on schooling explains this phenomenal growth in human capital.

KEYWORDS:

• Human capital
• economic growth
• Great Britain
• wealth
• knowledge

JEL CLASSIFICATION:

• E21
• E24
• J16
• J24
• J31
• N33
• N34

Acknowledgements

I thank all the participants in the project for all comments and help. An early version of this paper was presented at the Economic History Society’s annual conference in 2013. Finally, I would like to thank the referees and the editor for their long and critical but well-motivated comments that would deserve an article on their own.

Disclosure statement

No potential conflict of interest was reported by the author.

ORCiD

Jan Kunnas http://orcid.org/0000-0002-9433-0865

Notes

1 See also Horrell and Humpries (1995).

2 For a further discussion of Jorgenson and Fraumeni’s approach, see Kokkinen (2012, pp. 86–93).

3 In their case this is less of a problem given they were using recent Census data.

4 This calculation can be compared to that of Rowntree (1908, p. 83), who estimated that the average earnings of the males in a working-class family in York in 1899 was 28 shillings and 8 pence, and that of the females was 3 shillings and ¼ pence. This would return an even lower female wage share of around ten percent.

5 We converted their estimates from 2010 prices (17.25 Trillion £ in 2009, and 14.5 Trillion £ in 2001) to 2000 prices to allow comparison with our figures.

6 We could, however, easily model the effects of retirement.

Additional information

Funding

The calculations were made at the University of Stirling in the project History and the Future: the Predictive Power of Sustainable Development Indicators funded by the Leverhulme Trust [grant number F00241].