It had been clear for a relatively long time that if the share of human labour in output was only one-third, Solow’s model would provide a very good picture of reality in international comparison. To overcome this inconsistency, however, it was necessary to come up with the idea of introducing a new variable in the model that would represent human capital. Although this may seem obvious today – as such things always seem to be as soon as someone else thinks of them – it was a novelty in the late 1980s. It was another Nobel Prize Laureate in economics Robert Lucas who divided human labour into a part reflecting people’s general capacity for work, and the contribution of human capital that was a result of previous investment in education. What Lucas did was very simple from today’s point of view. Using the extensive structure of US economic data, he chose the average wage of people with basic education as a basic remuneration of people’s capacity for work. Then he gradually added the average wage of  BIS Review 81/2008  1  other people after each finished year of education. The results showed that every additional year of education up to the level of a bachelor’s degree increases the wage by 8% on average.
In fact, I would only like to reinforce the conclusion you have no doubt arrived at – that you made a good choice when you invested in your further education. In 1987, when Robert Solow was awarded Nobel Prize in Economics for his contributions to the theory of long-term economic growth, it was already clear that his model of long-term economic growth had certain shortcomings in its description of reality. On the one hand, this is by no means unexpected, as all economic models suffer from a similar syndrome to a certain degree. On the other hand, the causes of the empirical problems surrounding Solow’s model are very inspiring from our point of view. The whole issue revolves around determining to what extent long-term economic growth is aided by human labour and capital measured as the sum of all previous investments that are still in use. In practical calculations, the contribution of human labour is always simplified as the ratio of wages paid to output. This ratio is about two-thirds for the developed world. Therefore, two-thirds of output in developed countries are used to remunerate labour and the remaining one-third to remunerate capital. Problems occur if the contributions of human labour and capital calculated in this way are applied to two countries at a different level of development. In such cases, there is a significant degree of divergence between the characteristics of these economies observed in reality and predicted by the model.