13 Lecture%20Human%20Capital%201 - LECTURE 13 HUMAN CAPITAL...

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LECTURE 13 HUMAN CAPITAL I
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WHAT IS HUMAN CAPITAL? Human capital is a unique set of skills and abilities that individuals bring to the labor market. These skills are valued by the LM. Human capital is changing over the lifetime Education On-the-job training Health Key Idea: Treat human capital accumulation as an investment Today: Education/Schooling
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FACTS ABOUT EDUCATION IN THE U.S. Distribution of educational attainment (ACS 2007): 14% of population do not complete high school 57% complete high school and may attend but do not finish college 28% have a baccalaureate or higher Differences by gender are small, but women more educated among young Larger differences in educational attainment by race (ACS 2007): HS dropouts – 39% of hispanic, 17% of black, 9% of white College grad – 32% of white, 18% of black, 13% of hispanic
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TRENDS IN EDUCATIONAL ATTAINMENT 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 HS College+
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Median Weekly Earnings by Educational Attainment 0 200 400 600 800 1000 1200 Less than a high school diploma High school, no college Some college or associate degree Bachelor's degree and higher Relationship between Education and Earnings Median Weekly Earnings by Educational Attainment
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HOW MUCH SCHOOLING SHOULD YOU GET? Gain to an additional year of schooling Higher wages Greater likelihood of employment With positive LM impact – why would you stop? Costs of an additional year of schooling Tuition Hard work Opportunity cost – forgone earnings while in school
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OPTIMAL SCHOOLING Decision rule: Choose the education level with the greatest Benefit net of Costs At a given level, increase schooling only if Benefits are greater than Costs How do we compare when the cost and benefits accrue over several years?
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LET’S THINK ABOUT INVESTING… (last 2 years as of 10/01/10) Dow Jones Industrial Average (last 2 years as of 10/01/10) Nasdaq (last 2 years as of 10/01/10)
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FINANCIAL INVESTMENT EXAMPLE Have $1000 - (1) Not invest, (2) put money in 1 yr CD at 2% annual interest, (3) put money in 2 yr CD at 3% annual interest How much does each option yield? (1) $1000 today
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This note was uploaded on 01/19/2011 for the course ECON ECON 440 taught by Professor Kristinebrown during the Fall '10 term at University of Illinois at Urbana–Champaign.

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13 Lecture%20Human%20Capital%201 - LECTURE 13 HUMAN CAPITAL...

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