HUMAN CAPITAL INVESTMENT: THE RETURNS FROM HIGHER EDUCATION TO THE INDIVIDUAL AND THE ECONOMY

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Author: Seniour Assist. Prof. Diana Sabotinova (Burgas Free University)

Keywords: human capital, private rate of return on investment in higher education, social rate of return on investment in higher education.

The accumulation of human capital is an investment decision, assuming that the individual gives up some proportion of income during the period of education in return for increased future earnings. The purpose of this exposition is to show how the existence of high rates of private return to higher education investment provides an incentive for individuals to invest in human capital. As the benefits of education may not be restricted to the individual but spill over the economy as a whole this makes the social rates of return also high. The private and social internal rates of return are well above the real interest rate and the rate of return on other productive assets. Human capital plays a crucial role in the successful introduction of and the effective adaptation to technological and organizational changes. Two major theoretical frameworks try to model and analyze the contribution of human capital to economic performance - the growth accounting model and new growth theories.