Human capital, tangible wealth, and the intangible capital residual, Volume 1 (Policy Research Working Paper)
Since income is the return on wealth, the total wealth of any given country should be on the order of 20 times its gross domestic product. Instead the average observed ratio from the balance sheet accounts of the System of National Accounts is a factor of 2.6 to 6.6, depending on whether natural resource stocks are included in the balance sheet. The clear implication is that the System of National Accounts wealth accounts are incomplete, with the most obvious omission being human capital. This Policy Research Working Paper examines the residual intangible wealth that is arguably the “stock equivalent” of total factor productivity—the value of assets such as institutional quality and social capital that augment the capacity of produced, natural and human capital to support a stream of consumption into the future.