Abstract

This paper makes use of panel data covering roughly 300 000 individuals, spanning 14 years from 1992 to 2005, to estimate the distribution of human capital in the Swedish economy. The estimation strategy allows the human capital estimates to be decomposed into observable and unobservable components, whereby it is shown that the unobservable component is much more important and more highly correlated to wages. Upon adding human capital measures to a baseline wage equation, the explanatory power of the model increased from 50 percent to about 80 percent.