Assume that there are two types of employees—types
H and L. When employed the two types contribute $100 and $50 respectively to the employer. To obtain x units of education, Type H has to spend $x whereas Type L has to spend $4x (see table above). As discussed in class, education has no use other than its "signaling" value. What is the education level a Type H will acquire to separate herself from Type L, i.e., to convince an employer that she is indeed Type H, and thus receive a salary of $100. (there is competition among employers, so if the expected value to an employer from hiring an employee is $y, the employer will pay her $y.
Recently Asked Questions
- assuming a market interest rate of 6 percent per year, what is the present value of $5,000 payable at the end of three years?
- A treatment costs $1,500 and has benefits equal to $4,000.Costs range from a low of $1,250 to a high of $3,500.Benefits range from a low of $2,000 to a high of
- Woud you recommend more standardization of products and process? Is it good for TRI? If you were a large franchise, how would you fell about this?