Unformatted text preview: be covered by a research assistantship. After receiving his doctorate, he will become a professor in a business school and earn $400,000 in period 3. Peter’s discount rate is 20 percent per period. How would you determine which education path Peter will take? Be explicit about any calculations you would make. 2. (Borjas 7-8) Suppose there are two types of people: high-ability and low-ability. A particular diploma costs a high-ability person $8,000 and costs a low-ability person $20,000. Firms wish to use education as a screening device where they intend to pay $25,000 to workers without a diploma and $ K to those with a diploma. In what range must K be to make this an effective screening device?...
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- Fall '08
- Economics, Academic degree, Postgraduate education, Prof. Francisca Antman