Authors
Date (dd-mm-yyyy)
1992
Title
Optimal investments in human capital under uncertainty
Journal
Economics of Education Review
Volume
11
Publication Year
1992
Pages
41-49
Issue number
1
Document type
Article
Faculty
Faculty of Economics and Business (FEB)
Institute
Amsterdam School of Economics Research Institute (ASE-RI)
Abstract
In this paper we extend the standard human capital model with the probability of becoming unemployed and uncertainty about future earnings. Our analysis deviates from earlier human capital cum uncertainty models in assuming risk neutral decision-makers. This allows a straightforward comparison with the standard model and also facilitates calculations of unemployment and uncertainty accounted rates of return to education. The comparative statics of the model reveal that only the effect of changes in the earnings distribution can be signed unambiguously: greater dispersion in earnings by schooling level reduces the returns to schooling. The empirical illustrations suggest that accounting for uncertainty and the probability of becoming unemployed slightly equalizes differences in the rates of return for different levels of schooling.
URL
go to publisher's site
Permalink
https://hdl.handle.net/11245/1.400408