Estimating Human Capital Misallocation with a Panel Variable Coefficient Model

A panel variable coefficient model incorporating a varying intercept and slope is employed to estimate the aforementioned formula. The resulting output is subsequently utilized in equation (7) to derive the human capital misallocation indicator. This measure is subjected to an absolute value transformation, whereby a higher value indicates a greater degree of misallocation. Specifically, when the explanatory and dependent variables exhibit divergent changes, an improvement in human capital allocation is inferred.