Measuring the Human Capital by Activity Based Costing Method and Economic Value Added

Document Type : Original Article



Abstract: It is a big problem how to measure human capital accurately, which has puzzled economists for a long time. There is not an effective way to calculate the cost of human capital until now. In recent years, Activity Based-Costing (ABC) and Economic Value Added (EVA) have been well developed and applied in many industries in western countries. They are advanced theory of cost calculation and may provide us useful tools to measure human capital. The paper examined the cost characteristics of human capital with the theory of ABC. Key activities in the process of human capital’s development were found. Resource costs were allocated accurately and the procedure of human capital’s calculation was proposed. It provides us a new idea to measure and manage human capital and will do some help in further studies.


قارون، معصومه (1386). کاربرد هزینه‌یابی مبتنی بر فعالیت در برآورد هزینۀ سرانۀ دانشجویی. فصلنامه پژوهش و برنامه­ریزی در آموزش ­عالی، 13 (2): 79 – 107.
Becker, G. S. (1987). Human Capital. Beijing: Beijing University Press.
Chen, Lin & Qiao, Zhilin (2008). Measuring Human Capital with Activity Based-costing and Economic Value Added, International Journal of Business and Management, 3 (7): 55 – 59.
Chen, S.; Dodd, J. L. & James, L. (2001). Operating income, residual income and EVA(TM): which metric is more value relevant? Journal of Managerial Issues, 13: 65-86.
Dodd, J. L., & Chen, S. (1996). EVA: A new panacea? Business and Economic Review, 42: 26-28.
Dodd, J. L. & Johns, J. (1999). EVA revisited, Business & Economic Review, 45: 13-18.
Dutta, S. & Reichelstein, S. (1999). Asset valuation and performance measurement in a dynamic agency setting, Review of Accounting Studies, 4: 235-258.
Jacob, M. (1958). Investment in human capital and personal income distribution, Journal of Political Economy, 66: 281-302.
Li, Z. (1999). Human Capital. Beijing: Economics Science Press.
Lokanandha, R. I., & Raghunatha, R. (2006). Performance evaluation, economic value added and managerial behaviour, PES Business Review, 1: 1-7.
O’byrne, S. (1996). EVA® and market value, Journal of Applied Corporate Finance, 9: 116-125.
Reichelstein, S. (1997). Investment decisions and managerial performance evaluation, Review of Accounting Studies, 2: 157-180.
Stewart, G. B. (1995). EVA works - but not if you make these common mistakes, Fortune, 131 (8): 117.
Wang, J. (2001). Human Capital and Economic Growth —Theory and Demonstration. Beijing: China Financial & Economic Publishing.
Wang, P.; Jin, Q. & D. Ke (2000). Activity-based costing and its application in Chinese enterprises, China Accounting and Finance Review, 2: 121-155.
Wang, P., (2001). Research on Theory and Application of Activity-Based Costing. Dalian: Dongbei University of Finance & Economics Press.
Yan, S. & Duan, X. (2001). The comparative analysis on the human capital storge in the west China, Softscience of China, 6: 100-103.
Yoram, B. P. (1967). The production of human capital and the life cycle earnings, Journal of Political Economy, 75: 352-365.