The formation of human capital is the main issue in this dissertation. More specifically, this dissertation discusses two alternative types of transferring human capital, in contrast to the transfer of human capital from parents to their children's education. These two types of transfer are sibling effect and neighborhood effect on children's education. Chapter 1 discusses the sibling effect on children's education, "Household Models and Formations of Human Capital with Sibling Effect in Iran." The neighborhood effect on children's education will be discussed in Chapter 2, "Intergenerational Transfer of Human Capital from Parents to Children: Does Neighborhood Matter?" Chapter 3 measures and describes the rate of return on human capital in Taiwan, "Rate of Return on Education by Using Sibling Data from Taiwan."

My empirical results show the following findings. First, the presence of older sisters increases younger sisters' and brothers' education. After controlling the resource contribution factor, the empirical result suggests that a role model effect exists between daughters -- the education of older sisters benefits younger sisters in Iran. Second, assuming that the unobserved parent's preference on children's education is not correlated to the unobserved parent's preference on neighborhood, our results suggest that choosing a "good" neighborhood is important for children's education in Iran. Third, the results suggest that in 1990 data from Taiwan, upward bias in the rate of return on schooling due to the omission of family background factors is significant.