| Definition |
The skills, knowledge, health, and experience possessed by individuals. |
Man-made goods used in the production of other goods and services. |
| Nature |
Intangible and embedded in individuals. |
Tangible and visible assets like machines, tools, and buildings. |
| Development |
Built through education, training, healthcare, and experience. |
Built through investment in equipment, infrastructure, and technology. |
| Depreciation |
Can depreciate due to aging, lack of training, or poor health. |
Depreciates with usage, wear and tear, or obsolescence. |
| Mobility |
Highly mobile; individuals can move and work elsewhere. |
Limited mobility; fixed in location or requires transport. |
| Investment Type |
Non-physical investment (e.g., education, healthcare). |
Physical investment (e.g., purchasing machinery). |
| Return on Investment |
Higher productivity, innovation, and income over time. |
Increased production capacity and efficiency. |
| Measurement |
Difficult to measure; estimated via education level, income, or productivity. |
Easily measurable in monetary terms or physical units. |
| Ownership |
Owned by the individual. |
Owned by individuals, firms, or the government. |
| Examples |
Doctors, engineers, skilled workers, healthy labor force. |
Factories, tools, computers, transportation vehicles. |
| Transferability |
Cannot be transferred or sold. |
Can be bought, sold, or rented. |
| Role in Economy |
Drives innovation, efficiency, and long-term economic growth. |
Supports production and boosts output directly. |
| Creation |
Through education, health services, job training. |
Through manufacturing, construction, and purchases. |
| Flexibility |
Adaptable to changing economic needs and technologies. |
Less flexible; may become obsolete if not upgraded. |
| Risk of Loss |
Lost due to brain drain, illness, or underemployment. |
Lost due to natural disasters, damage, or wear-out. |
| Cost |
Often indirect and long-term (e.g., education costs). |
Usually direct and short-term (e.g., equipment purchase). |
| Government Role |
Provides education and health infrastructure to build human capital. |
Provides industrial and transport infrastructure to boost physical capital. |
| Improvement Over Time |
Improves with experience and continuous learning. |
Improves with technological upgrades and maintenance. |
| Impact on Productivity |
Enhances innovation and quality of output. |
Increases quantity and speed of production. |
Human Capital vs Physical Capital