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The final issue relates to the role of human capital. In Section 10.8, we discussed the Nelson-Phelps view of human capital, which emphasizes the role of skills
in facilitating the adoption and implementation of new technologies. While this
perspective is likely to be important in a range of situations, it seems that, in the
absence of significant external effects, this particular role of human capital should
not lead to a major mismeasurement of the contribution of human capital to aggregate productivity either, especially, in the types of exercises reported in Chapter
3.
This chapter has also contributed to our quest towards understanding the sources
of economic growth and cross-country income differences. We now have arrived to a
relatively simple and useful framework for understanding both physical and human
capital accumulation decisions. Our next task is to develop models for the other
major proximate source of economic growth and income differences; technology.
Before doing this, however, we will have our first look at models of sustained longrun growth.

10.10. References and Literature
The concept of human capital is due to Ted Shultz (1965), Gary Becker (1965),
and Jacob Mincer (1974). The standard models of human capital, used extensively in
labor economics and in other areas economics, have been developed by Becker (1965),
Mincer (1974) and Yoram Ben Porath (1967). These models have been the basis of
the first three sections of this chapter. Recently there has been a renewed interest in
the Ben Porath model among macroeconomists. Two recent contributions include
Manuelli and Seshadri (2005) and Guvenen and Kuruscu (2006). These models
make parametric assumptions (Cobb-Douglas functional forms) and try to gauge
the quantitative implications of the Ben Porath model for cross-country income
differences and for the evolution on wage inequality, respectively. Manuelli and
Seshadri (2005) also emphasize how differences in on-the-job training investments
will create systematic differences in unmeasured human capital across countries and
argue that once these “quality” differences are taken into account, human capital
differences could explain a very large fraction of cross-country income differences.
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