Planning Human Capital Structure: A Study of Economic, Demographic and Educational Determinants

There exists a need in less—as well as more—advanced economies for human resource development as an integral part of a planning program and a means of avoiding structural or sectoral unemployment. As a first approximation in planning a human capital structure for a given country, a set of ratios such as students per teacher, inhabitants per physician, nurse or lawyer, etc., may be considered a long-run plan objective. In this paper, economic as well as demographic and educational factors and parameters are used to construct a production function for human capital structure which is called the technical model. The technical model is subsequently used as a constraint in the determination and analysis of the least-cost condition of achieving alternative plans.

One of the theoretical results here is that such ratios become larger as the average percentage of student “dropouts” per year increase. The model shows that the marginal cost of improving the quality of human capital (by a requirement for a longer training period or by the establishment of stiffer educational standards) is an increasing function of such educational variables. Finally, the model gives an explicit algebraic expression for the qualitative-quantitative transformation-professional expertise vs. the number of personnel produced-existing in the production of human capital for equal or comparable costs. The model can be used for regional as well as global planning and in a mixed capitalist as well as a socialist economy.