education and human capital

NiCE Working Paper 07-102
December 2007

Education and training: from consumption goods to investment goods

Lei Delsen

Nijmegen Center for Economics (NiCE)
Institute for Management Research
Radboud University Nijmegen

P.O. Box 9108, 6500 HK Nijmegen, The Netherlands http://www.ru.nl/nice/workingpapers Abstract
Because of the prisoner 's dilemma, free-riding, hold up and liquidity constraints schooling and training of adult employed workers fail to reach the socially-optimum level. It is argued that cooperation and agreements between the social partners and the extension of collective labour agreement are solutions to these market failures. In their decision making and accounting practice not only private enterprises, also national governments treat education and training as consumption goods and not as investment goods. Some practical solutions are suggested to bridge the existing gap between human capital theory and accounting practice, and to improve the quality of decision making.

Lei Delsen, Department of Economics, Nijmegen School of Management, Radboud
University Nijmegen, P.O. Box 9108, NL 6500 HK NIJMEGEN, The Netherlands
T + 31 24 361 5933; F + 31 24 361 2379; E [e-mail]

An earlier version of this paper was presented in the Plenary Session of Track 3
Productive Employment and Education of the IIRA 14th World Congress "Social Actors,
Work Organization and New Technologies", September 11 14, Lima, 2006.

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1. Introduction

Human capital is a crucial factor that determines productivity of a country and is a key engine of economic growth. For employers it is an important factor that influences the competitive position on the product market. For employees human capital investment improves their position on the labour market and is an important determinant of individuals earning capacity and employability. Education is also associated with other personnel and social welfare benefits, including greater

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