What is the Human Capital Effect? The concept of human capital

Human capital has knowledge effects, including demand effect, income effect and substitution effect. Among them, the demand effect can not only promote the technological revolution of physical capital and increase the marginal output of physical capital input, but also promote the transformation of social production from labor-intensive to technology-intensive, thereby improving social productivity. The income effect can promote the rational allocation of economic resources by the subject of human capital property rights, improve the efficiency of resource allocation, and then promote the growth of output. The substitution effect can overcome or alleviate the scarcity and insufficiency of natural resources and physical capital in economic development, and then maintain sustainable social and economic growth.

Human capital has externalities, and the significance of these externalities for economic growth is diverse. First of all, the specialized knowledge formed by human capital investment can generate incremental returns from other factor inputs, and then increase the scale returns of the entire social economy. Second, the knowledge and capabilities generated by investing in human capital can not only improve the productivity of investors themselves, but also influence the people around them to improve their productivity.

Thirdly, investment in human capital plays a positive role in accelerating the dissemination of social technology and information, improving the efficiency of human resource market operation, improving the health of workers, improving social harmony, and reducing social crime rate.

Human capital is a Western economic concept, also known as "immaterial capital", as opposed to "physical capital", which is the capital embodied in workers. For example, the knowledge and skills, cultural and technical level and health status of workers. Its main feature is that it is associated with personal freedom and does not transfer with the sale of the product.

Formed through investment in manpower.

These include: (1) expenditures on education; (2) spending on health care; (3) expenditures on the internal mobility of labour; (4) Expenditures for immigration entry.

The most important of these is education expenditure, which forms educational capital. Through education, the quality of the labor force, the working ability and technical level of the workers can be improved, and labor productivity can be improved. Its growth, especially in education spending, is one of the sources of economic growth.

Expansion: Human capital versus other capital.

Human capital has greater value-added space than hard capital such as material and currency, especially in today's post-industrial period and the early stage of the knowledge economy, human capital will have greater value-added potential. Because human capital, as "living capital", is innovative and creative, and has the ability to effectively allocate resources and adjust enterprise development strategies. Investing in human capital contributes more to GDP growth.