Human Capital and Labour Productivity, Integration of Institutions and Endogenous Growth

This paper is part of a project that attempts to reveal the way labour market institutions, human capital and labour productivity are interconnected. First we discuss two approaches in the human capital theory, stressing some difficulties that could be solved if the approaches are combined. It is argued that the Nelson-Phelps approach could be improved by adding elements from the Lucas model. We think that the production factor of human capital needs a more detailed description than usual in empirical research, e.g. further schooling and training, experience and external effects. Empirical tests show that the frequently obtained conclusion that investments in higher education are too low are doubtful. The tests also show the importance of further education and training, especially on-the-job training.