1. Copyright © 2009 Pearson Education, Inc. 9- 1 Topic 4. Chapters 9 & 5 Human Capital

2. Copyright © 2009 Pearson Education, Inc. 9- 2 Figure 9.1: The Optimum Acquisition of Human Capital

3. Copyright © 2009 Pearson Education, Inc. 9- 3 Table 9.1: Changes in College Enrollments and the College/High School Earnings Differential, by Gender, 1970-2004

4. Copyright © 2009 Pearson Education, Inc. 9- 4 Figure 9.2: Alternative Earnings Streams

5. Copyright © 2009 Pearson Education, Inc. 9- 5 Present value approach  If PV>Cost then investment in additional schooling. Invest until PV=Cost  Cost: Out-of-pocket cost Fore-gone earnings Psychic losses

6. Copyright © 2009 Pearson Education, Inc. 9- 6 Predictions of the theory  Forward-looking people are more likely to go to college (low discount rate, r)  Most college students will be young  College attendance will decrease if the costs of college rise  College attendance will increase if the gap between the earnings of college graduate and high school graduate widens

7. Copyright © 2009 Pearson Education, Inc. 9- 7 Measuring returns to schooling  Use multiple regression approach Earnings = a + b*schooling  Difficulties 1. Proper measures of costs 2. Non-wage returns of education 3. Ability biases 4. Quality of schooling 5. Loss of leisure

8. Copyright © 2009 Pearson Education, Inc. 9- 8 Issues in education  Sheepskin effect (diploma effect)  Social return vs. private return to education  Screening and signaling

9. Copyright © 2009 Pearson Education, Inc. 9- 9 Figure 9.8: The Lifetime Benefits and Costs of Educational Signaling

10. Copyright © 2009 Pearson Education, Inc. 9- 10 Figure 9.9: Requiring a Greater Signal May Have Costs without Benefits

11. Copyright © 2009 Pearson Education, Inc. 9- 11 Figure 9.3: Money Earnings (Mean) for Full-Time, Year-Round Male Workers, 2005

12. Copyright © 2009 Pearson Education, Inc. 9- 12 Figure 9.4: Money Earnings (Mean) for Full-Time, Year-Round Female Workers, 2005

13. Copyright © 2009 Pearson Education, Inc. 9- 13 Skills  Skill acquired on the job  General human capital vs. specific human capital  Who bears the cost  Why age-earnings profile is concave?

14. Copyright © 2009 Pearson Education, Inc. 9- 14 Table 5.2: Hours Devoted by Firms to Training a New Worker during First Three Months on Job, 1992

15. Copyright © 2009 Pearson Education, Inc. 9- 15 Figure 5.7: Productivity and Wage Growth, First Two Years on Job, by Occupation and Initial Hours of Employer Training

16. Copyright © 2009 Pearson Education, Inc. 9- 16 Who Bears the Cost of Training?

17. Copyright © 2009 Pearson Education, Inc. 9- 17 Figure 9.5: Investments in On-the-Job Training over the Life Cycle

18. Copyright © 2009 Pearson Education, Inc. 9- 18 Table 9.2: Labor Force Participation Rates, Part-Time Employment Status, and Hours of Work in the United States, by Gender (2005)

19. Copyright © 2009 Pearson Education, Inc. 9- 19 Figure 9.6: The Increased Concavity of Women’s Age/Earnings Profiles

20. Copyright © 2009 Pearson Education, Inc. 9- 20 Table 9.3: Percentages of Women among College and University Graduates, by Degree and Field of Study, 1971 and 2004

21. Copyright © 2009 Pearson Education, Inc. 9- 21 Table 9.4: International Comparisons of Schooling, 2002-2003