Lecture 15 - Lecture Lecture15 HumanCapitalInvestmentsII

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cture 15 Lecture 15 Human Capital Investments II How much more does having an dditional year of education increase additional year of education increase earnings?: Evidence
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he decision to go to college The decision to go to college
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ate of Return to Education Rate of Return to Education is is the interest rate that sets the benefits This is the interest rate that sets the benefits of an additional year of education equal to the sts costs. (In US this is estimated to be between 7 and 10 percent)
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Graphical Representation (MB is declining because less time to enjoy and diminishing returns) People with higher personal interest rates have a smaller MB of People who find school easy have a smaller MC of education. education.
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plications Implications Q: Suppose people who find school easy also do a etter job at work What does this imply about better job at work. What does this imply about the wage differences we observe between people with more and less education? Q:Suppose people with higher discount rates also slack off at work. What does this imply about the wage differences we observe between people with more and less education? A: The wage difference will reflect both the effect of education on wages and the effect being good school (being more patient) at school (being more patient).
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uestion Question people who have an additional year of If people who have an additional year of education have wages that are 8 percent higher, does that mean that getting an additional year of education will increase wages by 8 percent? Why or why not?
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This note was uploaded on 01/09/2010 for the course ILRLE 2400 at Cornell.

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Lecture 15 - Lecture Lecture15 HumanCapitalInvestmentsII

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