Increasing returns to education and the skills under-investment trap
By: by Alison L. Booth, Melvyn Coles.
Contributors: Coles, Melvyn Glyn, 1961-
Series: Discussion paper ;; no. 1657; Discussion paper (Forschungsinstitut zur Zukunft der Arbeit : Online) ;; no. 1657
Publisher: IZA
Published: 2005
Place of publication: Bonn, Germany
Language: eng
Format: Electronic resource
Subjects: Education -- Economic aspects.; Labor supply.
Description: "We model educational investment and labor supply in a competitive economy with home and market production. Heterogeneous workers are assumed to have different productivities both at home and in the workplace. We investigate the degree to which there is under-investment in human capital, and examine the deadweight losses that accrue via distortionary taxes. We show that there are increasing returns to education at the participation margin, and that deadweight losses are most severe for workers located here. Although the social planner's optimum implies the worker should choose a high level of education and participate in the market sector, instead the worker chooses not to invest in human capital and either non-participation or partial participation in market-sector work. A severe deadweight loss is generated by this substitution effect. Those individuals most likely to be in this trap are those types with large enough home productivity, who are likely either to be involved in home production or to be characterized by a strong preference for other non-market sector activities"--Forschungsinstitut zur Zukunft der Arbeit web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 7/26/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.