Arbeitspapier
Increasing returns to education and the skills under-investment trap
We model educational investment and labor supply in a competitive economy with home and market production. Heterogeneous workers are assumed to have different productivities both at home and in the workplace. We investigate the degree to which there is under-investment in human capital, and examine the deadweight losses that accrue via distortionary taxes. We show that there are increasing returns to education at the participation margin, and that deadweight losses are most severe for workers located here. Although the social planner's optimum implies the worker should choose a high level of education and participate in the market sector, instead the worker chooses not to invest in human capital and either non-participation or partial participation in market-sector work. A severe deadweight loss is generated by this substitution effect. Those individuals most likely to be in this trap are those types with large enough home productivity, who are likely either to be involved in home production or to be characterized by a strong preference for other non-market sector activities. home production ; labor supply ; returns to education ; income tax
- Language
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Englisch
- Bibliographic citation
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Series: IZA Discussion Papers ; No. 1657
- Classification
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Wirtschaft
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Fertility; Family Planning; Child Care; Children; Youth
Human Capital; Skills; Occupational Choice; Labor Productivity
Wage Level and Structure; Wage Differentials
Monopsony; Segmented Labor Markets
- Event
-
Geistige Schöpfung
- (who)
-
Booth, Alison L.
Coles, Melvyn G.
- Event
-
Veröffentlichung
- (who)
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Institute for the Study of Labor (IZA)
- (where)
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Bonn
- (when)
-
2005
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Booth, Alison L.
- Coles, Melvyn G.
- Institute for the Study of Labor (IZA)
Time of origin
- 2005
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