Thursday, October 19, 2006

"Innovation at Work: The European Human Capital Index"

Source of figures: Conservation Finance

Read the full Lisbon Council Policy Brief by Peer Ederer, 2006. (PDF, 24 pages)

Ederer has developed an interesting index, composed of four subindices:
* Human Capital Endowment

* Human Capital Utilization

* Human Capital Productivity

* Demography and Employment
I think the idea is clear. The first three indices are factors which when multiplied should give you the total production of the society. The fourth factor, especially important in Europe where many countries have low birth rates and decreasing work forces, indicates whether production is likely to increase or decrease in the future.

The report focuses on human capital in 14 European countries, and the results correspond generally with our intuition -- Sweden and Denmark come out best and Italy and Spain worst. There seems to be a good correlation between investment in human capital and utilization of human capital. There are some surprises, however. While Finland spends a lot on formal education, Sweden comes out ahead on human capital investment because of its favorable child rearing practices.

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