Measuring Human Capital in Higher Education

The concept of Human Capital (HC) could be defined, from an economical viewpoint, as a stock variable representing the capacity of an individual to produce a sustained flow of income due to its investment in (higher) education and work experience. This paper focuses on the empirical estimation of the latent variable HC, composed of two principal dimensions, Educational HC and Work Experience HC, within a realistic structural model allowing causal relationship among endogenous and exogenous indicators taking into account possible effects of concomitants indicators. To this end, new administrative archives and a novel methodological approach, called Generalized Redundancy Analysis are used. The methodology is applied to estimate HC of graduates in two universities of the Milan area in the early stages of their working career. The empirical results confirm the structure of the Italian job market, where the work experience and economic background of origin family play significant roles for explaining the economic performance of graduates in the labour market, contrary to investment in HC through higher education.