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Economic Resources

KHALED ABD El-WAHAB

Elbendary
Prof. of Economics
Beni sueif University

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■ Chapter (3):Human Capital and Physical Capital

This chapter discuss the following points:
■ 3.1 Introduction
■ 3.2The Concept of the Human Capital development
■ 3.3 The Economic Importance of the Human Capital
■ 3.4 The Investment dimensions in the Human Capital
■ 3.5 The factors affecting the Investment of the Human
Capital
■ 3.6 The Determinants of Investment in the Human
Capital
■ 3.7 Human development Index
■ 3.8 Population, Human Capital, and Long-run Growth
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Cont.
■ Chapter (3):Human Capital and Physical Capital
This chapter discuss the following points:
■ 3.9PhysicalCapital Concept
■ 3.10Chacteristics of Physical Capital
■ 3.11 Kinds of capital
■ 3.12 Physical Capital and Financial Capital
■ 3.13 Investment and Capital
■ 3.14 Wealth and Saving
■ 3.15 Markets for Financial capital
■ 3.16 Global Financial Markets
■ 3.17 Interest Rates and Asset Prices

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Learning Objectives
After studying this chapter, students should be able to:
■ Define the human capital and the terms related to the
definition
■ Explain the economic importance of the human capital.
■ Explain the investment dimensions in the human capital,
and identify the factors affecting the investment of
human capital.
■ Define and explain the human development index.
■ Define the physical capital and it characteristics.
■ Distinguish between financial capital, and other types
from capital.

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intro
This Chapter aims at showing the
economic importance of the human
capital, the role of education in it,
human capital theories, physical
capital concept, and its different
types.

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Basic Concepts Related to human capital

There is a set of different concepts related to
human capital:
The human resources development means a
comprehensive development of the
self-potentials and increasing the skills and
knowledge of the society's individuals.

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2.2 Basic Concepts Related to human capital

These are the two aspects of the Human
Development: The First aspect: is the formation
of the human potentials such as improving the
standard of health, knowledge and skills. The
second aspect is the people's utilization of their
acquired potentials so that they can either
enjoy their spare time or for production
purposes or for cultural, social and political
affairs

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2.2 Basic Concepts Related to human capital

Human capital: is a group

resources including all the
knowledge, talents, skills,
abilities, experience,
intelligence, training, judgment,
and wisdom that people in a
country, whether individually or
collectively possess.
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The Economic Importance of the Human Capital

📫the value of the human factor as an economic

unit which contributes to the production
process.
📫The scientific and technological
transformation and what it was followed in
terms of the modern developments in the
production process resulted in successive
changes in the methods of production
📫Education and training and increasing his
scientific and intellectual practices
📫Skills development as a key strategy for economic
competitiveness and growth.
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The Investment dimensions in the Human

Capital
1-The Cultural dimension: The increase in the ratio of
the educated people is reflected in the human
resources.
2- The Economic dimension: Through the qualified
and trained human resources
3- The Social dimension: Education promotes the
mental and intellectual individual's potentials and
makes him acquire the balanced behavior
4- The Scientific dimension: The education provides
the scientific Groups which can perform research,
creativity, invention and development
5- The Security dimension: the security stability of
the society
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The factors affecting the Investment of the

Human Capital
1-The Geographical Factors: These factors include
the country's location, climate, natural environment
and sources of its resources
2- The Population Factors: The investment in the
human capital is directly affected by the population
structure and average population growth
3- The Social Factors: These are the factors related
to religion, language and the social formation
4- The Economic Factors: There is a correlation
between the economics, education and training
5- The Political Factors: the influence of the political
stability in the effectiveness and continuity of the
education.
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Human development Index :

this index contains special indexes of

education, health and per capita of income
and calculates an index of each
component of human development that
reflects the health level of age expectancy
life at birth, the educational level that is
measured by Literacy rate and total
Enrollment Percentage in the various
stages of education and income level that
is measured by per capita of income

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Measure of element = Human development Index :

The followings are the minimum and maximum values for each component of an index of human development:

Measure of element =

Actual Value of the element – the minimum value of the element

The maximum value of the element – the minimum value of the element

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Human development Index

The followings are the minimum and maximum values for
each component of an index of human development:
- Life expectancy at birth:
-The minimum value of 25 years.
-The Maximum value of 85 years.
-Literacy rate among adults (15 and older):
-The minimum value of zero-
-The maximum value of 100%
- Enrollment percentage in the various stages of
education:
- The minimum value zero
📫The maximum value of 100%
Measure of Education =⅔ (rate of literacy among adults)
⅓ (Measure of the rate of enrollment)
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Human development Index

- A measure of per capita of income in dollar (PPT)
-The minimum value of $ 100
-The maximum value of $ 40,000
We can calculate the human development index by the
following equation:
Human Development Index (HDI) = Q1+Q2+Q3 ⁄ 3
Where:
Q1= Life expectancy at birth
Q2= measure of Education
Q3= A measure of per capita of income in dollar (PPT)
The human development index of between zero and
one, and the closer the value of this one indicates, the
higher the level of human development, and vice
versa.
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Physical Capital Concept

Capital:
is one of the essential factors
in the development process in
developing countries and the
growth in developed countries,
In addition to the level of
education and health, capital is
considered to be rare in
developing countries compared
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Physical Capital Concept

Physical Capital is defined as:

Machines.
Buildings.
Infrastructure:
Roads
Bridges
Computers
In whatever work we do, we need the
help of some type of physical capital. In
this way, we are more productive
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kinds of physical capital

Financial capital facilitates economic
production, though it is not itself Productive,
referring rather to a system of ownership or
control of physical capital. Natural capital is
made up of the resources and ecosystem
services of the natural world. Produced capital
consists of physical assets generated by
applying human productive activities to natural
capital and capable of providing a flow of goods
or services. Human capital refers to the
productive capacities of an individual, both
inherited and acquired through education and
training. Social capital, the most controversial
and the hardest to measure, consists of a stock
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Physical Capital and Financial Capital

-Physical capital is the tools, instruments, machines,
buildings, and other constructions that have been
produced in the past and that are used to produce
goods and services.
-Financial capital is the funds that firms use to buy
and operate physical capital.
-Investment and Capital:
Gross investment is the total amount spent on new
capital goods.
Net investment is the change in the quantity of
capital—equals gross investment minus depreciation
- Wealth and Saving:
Wealth is the value of all the things that a person
owns.
Saving is the amount of income that is not paid in
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