HUMAN CAPITAL

FORMATION
Made By:
Antima Singh
XII-B
WHAT IS HUMAN CAPITAL FORMATION ?
Human Capital Formation refers to
development of abilities and skills among
the population of the country .It is a
process of acquiring and increasing the
number of persons, who have the skill,
education and experience .Human Capital
Formation is associated with investment
in man and his development as creative
and productive resources.
 COMPARISON BETWEEN PHYSICAL CAPITAL
AND HUMAN CAPITAL
 Physical Capital
• Physical Capital is tangible and can be easily
sold in the market .
• It depreciates with the passage of time .
• It is more mobile between countries .
• Physical Capital (like machinery) can be
separated from its owner .
• It can be built through imports .
 Human Capital
• Human capital is intangible and cannot be
sold in the market .
• Depreciation in Human capital can be reduced
by making continuous investments in
education and health .
• Human capital is less mobile between countries
as compared to Physical capital .
• Human capital (like skills of a person) cannot
be separated from its owner .
• Human capital formation is to be done through
conscious policy formation .
 SOURCE OF HUMAN CAPITAL FORMATION
Expenditure on education:
Expenditure on Education is the most effective
way of enhancing and enlarging a productive
workforce in the country .It is therefore a very
important determinant of human capital
formation .

C
F Monetary benefits of education(in terms of earnings of the O
A educated person during his life time) for exceed the cost of R
C education .The difference between benefit and cost is an approx. N
T market value of human capital formation. E
R
Expenditure on Health:
Expenditure on health makes a man
more efficient and, therefore, more
productive. His contribution to the
production process tends to rise. He
adds more to the GDP of the nation
than a sick person. Expenditure on
health therefore, is an important
determinant of human capital
formation. It brings out the best skills
in human beings.
 On-The-Job Training
On-The-Job Training helps workers to
know their specialized skills. It enables
them to raise the level of their
efficiency/productivity. Firms are always
inclined to undertake ‘on- the-job
training’ programs. Because, returns( on
account of enhanced productivity) for
exceed the cost on such programs.
Expenditure on such training programs,
therefore, is yet another important
determinant( and a source) of human
capital formation.
Expenditure on migration:
Migration contributes to human capital formation as it facilitates
utilization of( otherwise inactive skill of the people, or it facilitates
fuller/better utilization of the skill. Migration involves (1)Cost of
transportation from one place to another and (2) Cost of living in
different social environment. Because gains of migration( in terms of
higher salaries) are greater than the cost of migration. Implying that
migration leads to human capital formation through fuller/better
utilization of skills.
Expenditure on information:
Information relating to job markets and
educational institutions offering
specialized skills is an important
determinant of skill formation. It
enables people to actualize their
productive potential. Accordingly,
expenditure on information is another
determinant of human capital
formation.
THANKYOU