other factors. Consider a simplified economy where there are just two types of job searcher: a College educated agent assumed to receive high utility from leisure and a High School educated agent assumed to receive low utility from leisure. The High School agent will receive lower job offers because she has completed less schooling. Despite this, she will be likely to accept them because she does not value leisure very much. The College agent will receive higher job offers because she has completed more schooling. On top of that she will be very picky before accepting them because working will force her to give up at least a portion of the leisure she so much values. The differential in accepted wages between the two workers will then be driven by two different forces: the difference in schooling level, which is a genuine return to schooling, and the difference in preferences for leisure, which should not be factored in as return. Genuine returns to schooling should be computed based on wage offers not accepted wages. Recovering the wage offer distribution becomes necessary in order to evaluate the actual returns to schooling. Eckstein and Wolpin (1995) estimate the differences between returns estimated on accepted wages and returns estimated on wage offers to be significant. Using NLSY79 data on men, they estimate the internal annual rate of return for completing College relative to only completing High School to be 31.5% for blacks and 17.0% for whites. The same returns would be much lower if only accepted wages were considered: respectively, 9.4% for blacks and 11.9% for whites.

Flinn and Mullins (2015) show how the previous considerations are also important when building counterfactuals to evaluate policy experiments. They study school subsidies taking into account that any change in them, even if small scale, will have an impact on the reservation wage of all the individuals participating in the market. But if reservation wages change, then it is not enough to know the current accepted wages: the evaluation of the policy requires predicting the accepted wages in the new policy environment. In order to predict the new accepted wages the primitive wage offers need to be recovered. They accomplish this thanks to the structure of the search model together with some parametric assumptions. They conclude that a schooling subsidy financed by a lump-sum tax improves overall welfare, reduces aggregate unemployment, and increases production in the economy. A school subsidy covering about 10% of the cost of schooling will increase output by about 4.6%.

# **5. Conclusion**

Human capital is a broad concept including " _education, training, medical care, and other additions to knowledge and health_ " [Becker (1992)] but also neural connections in the brain [Romer (2015)]. The importance of human capital in affecting growth has long been recognized by the literature [Lucas (1988); Romer (1990).] The paper summarizes it by describing three main pathways:

1. _The direct impact_ , responsible for increasing the stock and accumulation of the factor of production labor;

2. _The impact on technological progress_ , able to increase the productivity of all the factors of production.

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