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Anale. Seria InIormaticá. Vol. IV Iasc.

I - 2006
Annals. Computer Science Series. 4
Tome 1
Fasc. - 2006


D De ef fi in ni it ti io on n a an nd d C Co on nt te en nt t I In nt te er rp pr re et ta at ti io on n
o of f H Hu um ma an n C Ca ap pi it ta al l

Candidate of Economic Sciences Verhoglyadova N. I.
Regional Higher Educational Institution
'Strategy¨, the Institute Ior Entrepreneurship

ABSTRACT: The article is devoted to researching the nature oI
human capital, its internal structure, comparative characteristics oI
human capital and other economic categories; Iactors oI its Iorming
under present conditions oI transIormations in the economy oI
KEYWORDS: human capital, physical capital, social capital;
structure, types oI human capital; investing in human capital, labour
potential; Iactors oI Iorming human capital; intensive Iactors,
extensive Iactors.

1. Introduction

The processes oI dynamic development and Iast renewal oI scientiIic and
technical basis oI modern society caused deep transIormations in all areas oI
its liIe activities, led to changes oI human`s place and role in socio -
renewing process.
Up to recently researching the problems that concern the aspects oI
improving quality oI labour Iorce there have been Iocused on using but not
Iorming oI human resources. However scientiIic technical revolution,
changes to socially oriented market policy demand theoretical
understanding oI numerous tasks related with creating qualitatively new
labour Iorce. Structure changes in the economy oI developing countries
have become an objective basis Ior appearing the theory oI human capital.
Immediate impulse to creating this concept is related with the problem oI
economic growth: in the epoch oI scientiIic technical revolution and
changes in structure oI productive Iorces the employee is becoming the

Anale. Seria InIormaticá. Vol. IV Iasc. I - 2006
Annals. Computer Science Series. 4
Tome 1
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Iactor oI economic growth and the eIIiciency oI company`s Iunctioning
depends on the quality oI human capital.
But Irom our point oI view the idea oI human capital moves back to
the long history oI economic thought. One oI its Iirst wordings appears in
'Political Arithmetic¨ oI W. Petty. Later it was studied in works oI A.
Smith, A. Marshall, K. Marks, I. Fisher and other scholars. However, as a
special Iield oI economic analysis the theory oI human capital was Iormed
only at the Irontier oI 50-60s in the twentieth century. T. Shultz is
accomplished Ior this theory and basic theoretical model oI educational
market was developed by G. Becker in his work 'Human Capital¨.

2. Setting objectives

The article is objected to analyze diIIerent approaches to comparative
characteristics oI the categories 'human capital¨ and 'physical capital¨,
'human capital¨ and 'social capital¨, 'human capital¨ and 'labour
potential¨; researching the Iactors oI human capital Iorming and analysis oI
their structure and characteristics.

3. Results

Traditionally human capital is deIined as incarnated Iund oI human abilities,
knowledge, skills and motivations to encourage human productivity. So
human capital is not only the body oI knowledge, abilities that a human has;
at the same time human capital involves acquired knowledge as well to use
in this or that area oI social activity that contributes to growing productivity
oI labour and production. At that, using oI accumulated resources oI human
capital leads to the increase oI earnings (income Ilow) oI the given
employee, that, in its turn, encourages Iorming interest among employees
and in the next cycle leads to the growth oI investments in human capital.
Consequently motivation is a necessary element to make the process oI
renewing the human capital (Iorming accumulating - using) cyclically
As A. S. Dyatlov considers, at the end oI 19-th beginning 20-th
centuries there were Iormed two directions oI economic thought which
discussed the deIinition oI the term 'human capital¨. The majority oI
scholars deIined the man himselI as capital: L. Valras, G. M. Clark, H. D.
McLeod, G. McKulokh, I. Tunen, T. Witshtane, W. Farr, I. Fisher were

Anale. Seria InIormaticá. Vol. IV Iasc. I - 2006
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addicted to this point oI view. The representative oI another direction, such
as F. List, G. Mill, W. Rosher, N. Senior, Kh. Sidjuic, G. Z. Walsh,
considered that the capital is presented as inherited and possessed by man
qualities and abilities. As G. Mill wrote, 'An individual himselI . is not
capital. A human is an aim Ior whose sake the wealth exists. But his
possessed abilities that act only as a method and are being realized only by
means oI work can be reIerred to the category oI capital without any doubt¨.
Forming oI human capital like accumulating physical and Iinancial
capital requires taking assets out oI current consuming to get extra return in
Iuture. It is also considered as a long term beneIit; it needs expenditures to
be repaired and exploited; it can become out oI date beIore its physical
amortization. These two types oI capital are similar to be main Iactors oI
social renewing process, and in conditions oI modern market economy they
are able to make a special income; their interaction takes place as a
component oI total production capital that makes income. Forming oI both
capitals needs essential expenditures and taking a lot oI assets and time out
oI current consuming that makes a loss. Investments to both types oI capital
allow providing long term eIIect; both capitals can accumulate and act as a
reserve. Every type oI capital can be expressed in monetary terms and the
result oI their use can be measured in natural and monetary Iorms. Both
types oI capital have physical and moral amortization.
At the same time the similarity between human capital and capital in
its traditional understanding can`t be considered absolute. Firstly, in
nowadays society an individual is not the subject Ior buying selling. As a
result, market sets only the prices on renting human capital (as wage and
salary rates) while there is no price on its assets. Secondly, human capital is
able to increase its eIIiciency in market sector as well as out oI market.
Obtainable income may be expressed in monetary or not monetary Iorms.
Consequently, consuming aspects oI investments in human capital are not
less important than manuIacturing ones.
Besides diIIerences among qualitative characteristics oI human
capital we should recognize human and social capital that is deIined as
capital oI interaction. II physical capital takes evident materialistic Iorms we
could hardly say that about human capital. It appears in skills and
knowledge acquired by an individual. Social capital is less tangible as it
appears while interacting oI individuals. Like physical and human capital,
social capital makes easier manuIacturing activity. As any other social
capital inclines to grow or depreciate depending on its place in the system oI
social, market relations among participants oI the social process.

Anale. Seria InIormaticá. Vol. IV Iasc. I - 2006
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As the comparative analysis oI individual and social human capital
shows the concept oI social human capital highlights on mutual relations oI
economic entities but not an individual (Table 1).

1able 1. Comparison of human and social capital concepts
Feature Human capital Social capital
Object oI research Individual Mutual relations
Parameters oI
1. the length oI
2. the level oI
1. relations/ values
2. partnership/
3. level oI trust
Directions oI action 1. Direct: income,
2. Indirect: health,
social activity, etc.
1. social unity
2. economic
3. higher level oI
social capital

From our point oI view the social capital should rationally be
considered not as part oI human capital but as an independent category that
is deIined as accumulated in community source oI trust and predictability
that essentially stipulates eIIectiveness oI using the resources and human
resources in particular. The total human capital is heterogeneous and has
diIIicult interior structure that is not stable but dynamically changes with
Two types oI human capital can be distinguished:
-consuming, created by services consumed directly (creative and
educational activities);
-productive, its consuming encourages social utility (designing means oI
production, technologies, manuIacturing services and products).
According to the Iorms oI realization in terms oI human capital the
Iollowing can be distinguished:
1) alive capital which includes knowledge, health incarnated in a human;
2) subjective capital that is created when knowledge is being accomplished
in physical, material Iorms;
3) institutional capital that is the institutions contributing to use all kinds oI
human capital.
Besides human capital is classiIied according to the types oI
investments emphasizing educational capital, health capital and culture

Anale. Seria InIormaticá. Vol. IV Iasc. I - 2006
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capital. The health capital is the investments to a human to Iorm, support
and improve his/her health and ability to work. Investments in health, its
care, helping to reduce the sickness and death rate, extend human`s able-to-
work liIe and consequently the time oI human capital Iunctionning. Culture
capital is a system oI culture values accepted by an individual. Culture
capital is Iorming under the inIluence oI educational technologies -
purposeIul studying in specialized institutes as well as studying by
accumulating experience and inIormation in everyday and work liIe.
In more details we can present the given classiIication with the
Iollowing elements:
1) intellectual capital (level oI education, knowledge);
2) Iund on training at manuIacturing (qualiIication, skills, experience);
3) Iund oI health (psycho physical and emotional characteristics);
4) Iund oI economy important inIormation (about prices and earnings);
5) Iund oI migration (mobility oI human resources);
6) motivation oI economic activity;
7) Iund oI Iree time (recreating and general cultural level oI renewing
human resources).
At the same time it is necessary to distinguish intellectual capital as
an element oI human capital and as a broader general category that includes
human capital as a necessary element.
Comparing terms 'working capital¨ and 'human capital¨ we can Iind
rather close link between them. So, demographic and medical biological
elements oI labour potential (according to the classiIication developed by
M. I. Dolishniy) absolutely logically can be compared with the health
capital as the component oI human capital. Educational and proIessional
qualiIication components oI these categories are similar except oI the Iact
that psycho physiological characteristics oI a human are considered in
terms oI proIessional qualiIication capital, but M. I. Dolishniy emphasizes
on morale potential oI a human.
Including competence, mobility and knowledge awareness oI
inIormation communication technologies to the structure oI human capital
is the result oI the transIormation to the inIormation community with the
high mobility oI all its components.
The term 'labour potential¨ according to its content is closer to the
term 'human capital¨. In a simple way human capital can be interpreted as
working potential that is realized under market conditions accepting
productive nature oI investments in economy oI a human.
Comparative characteristic oI these categories is conducted
according to various criteria (table 2).

Anale. Seria InIormaticá. Vol. IV Iasc. I - 2006
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ReIerring to the environment that caused appearing the category oI
'human capital¨ we should mention that under the conditions oI continuing
transIormations it is necessary to take into consideration that the economy
oI Ukraine is on the transition to inIormation society. Its Ieatures suppose to
be aware oI inIormation technologies and the Iact that science is becoming
an essential productive Iorce.

1able 2. Comparative characteristic of the categories
'labour potential` and 'human capital`
Criteria oI
'labour potential¨
'human capital¨
1. Environment
Ior appearing:
administrative economy
Market economy
-hierarchy oI

-type oI 'social
(patriarchal) individual
'Economic individual¨
2. Levels oI
-state (macroeconomic);
-regional (mezzo-economic);
-microeconomic (level oI enterprises);
-personal (individual, Iamily level).
level oI education;
proIessional competence;
state oI health;
3. Elements oI
internal structure
-awareness oI economy
important inIormation;
-being motivated;
4. Index oI
Labour production Wage rate as an index oI
the eIIiciency oI
investments in human

Numerous Iactors inIluence Iorming and exploiting human capital. To
manage this process eIIectively it is oI great importance to classiIy these

Anale. Seria InIormaticá. Vol. IV Iasc. I - 2006
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Iactors according to various scientiIic descriptors. ClassiIying descriptors
include the Iollowing:
- phases oI renewing (Iactors oI Iorming and Iactors oI using);
- type oI inIluence in the process oI renewing (intensive or extensive);
- level oI inIluence (macro-, mezzo-, microeconomic and individual);
- type oI inIluence (direct and indirect);
- result oI inIluence (positive and negative).
Using the classiIication oI the Iactors that Iorm human capital we
can point out the most important oI those that suppose adequate
representation oI socio economic, nature, demographic, geopolitical,
national cultural and other conditions to provide eIIective development oI
the united economic area, in particular, oI a region (picture 1).

Fig. 1: Factors of extensive and intensive influence

Intensive Iactors lead to the increase oI human capital by mobilizing
internal reserves oI the system, that is, its qualitative parameters. On the
other hand, extensive Iactors make the same eIIect due to the growth oI
quantitative parameters. At the same time, all Iactors, more or less intensive,

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inIluence on Iorming and using human capital. Nevertheless, we can point
out three main Iactors that directly deIine the size oI regional human capital:
number oI economic active population and its growth rate, index oI
educational level and state oI health oI the population. Other Iactors
inIluence mostly indirectly (Table 3).

1able 3. Characteristic of the factors forming human capital
Factors Characteristic
Level oI
1 2 3
Demographic -population;
-sex age structure oI population;
-rate oI natural growth oI
-average length oI liIe.
and macroeconomic
Socio -
-number oI economic active
-division oI economic active
population according to the
industries and sectors oI economy;
-number oI employed and
unemployed population;
-administrative territorial division oI
employed and unemployed population;
-length oI work active liIe period
and macroeconomic
Social -level oI general education and
proIessional competence oI
-state oI health and level oI culture;
-level oI development oI social
inIrastructure on a territory;
-internal migration oI the population;
-growth rate oI migratory balance.
mezzo-economic and
-Iactors oI
supporting and
-real income oI the population;
-income division according to the
population groups;
-paying capacity oI the population;
-rate oI inIlation and economic
mezzo-economic and

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Table 3 - continued
1 2 3
inIluencing on
-quantitative and qualitative
characteristics oI labour market
demand (or job vacancies);
-level oI technical economic
-general current economic situation;
-management eIIiciency at all levels
oI economy.
mezzo-economic and
Organization -
-organizational mechanism oI
economy Iunctioning (creditIiscal
mechanism, tax system, system oI
work stimulation, location oI
labour Iorce on a territory);
-level oI specialization, concentra-
tion and cooperation oI production;
-state oI international economic links.
mezzo-economic and
Ecological -general ecological condition oI a
-quality oI drinking water and Iood;
-nature climatic conditions;
-sanitary hygienic working
-recreating characteristics oI a
mezzo-economic and


So, human capital possesses the dominating place in the system oI national
wealth oI modern community: physical capital (that is usually counted and
interpreted as national wealth), or accumulated material beneIits total only
16° oI overall world wealth; natural resources, or natural capital, are
estimated oI 20°; human capital accumulated investments in an
individual are 64° oI world wealth.
Undertaken research studies oI human capital revealed its Iollowing
1. Human capital is the main value oI modern society as well as basic Iactor
oI economic growth.

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2. Forming oI human capital requires substantial expenditures Irom an
individual and the society as a whole.
3. Human capital can be accumulated and an individual can gain certain
skills, abilities, improve his/her health.
4. With time human capital grows as well as experiences amortization
both physical and morale. Individual`s knowledge becomes out oI date, that
is, cost oI human capital changes in the liIetime. Human capital`s
amortization is empirically grounded. In modern society the period oI
knowledge renewing is no more than 5 years and only knowledge but
experience as well are under amortization.
5. Investments in human capital give their owners, as a rule, higher income
in Iuture. These investments provide the community with longer (time
duration) and integral (according to their nature) economic and social
6. Investments in human capital are estimated as long- term: average
period oI investing in education is 12-20 years, and health capital is invested
by an individual during liIetime.
7. Human capital diIIers Irom physical capital according to liquidity rate as
it can`t be separated Irom an individual.
8. An individual controls his/her direct incomes independently on the
resource oI their origin.
Functioning oI human capital depends on an individual`s decisions
and his/her will. EIIiciency oI human capital is determined by individual
interests oI a person, his/her preIerences, material and moral interest, scope
and general level oI culture.


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Anale. Seria InIormaticá. Vol. IV Iasc. I - 2006
Annals. Computer Science Series. 4
Tome 1
Fasc. - 2006