EC306 Lecture Notes - Lecture 10: Progressive Tax, Mira-Bhayandar Municipal Corporation, Real Interest Rate
Document Summary
Human capital refers to the economic value of the unique set of abilities and acquired skills of a worker. Workers add to their stock of human capital throughout their lives, especially through formal education and on-the-job experience. Education: stylized facts: education is strongly correlated with: Labour force participation rates: much lower for less educated, unemployment rates, much higher for less educated, earnings, strong positive correlation. Education plays a sig(cid:374)ifi(cid:272)a(cid:374)t role i(cid:374) i(cid:373)provi(cid:374)g o(cid:374)e"s la(cid:271)our (cid:373)arket out(cid:272)o(cid:373)es. Investments in human capital are made to improve productivity and earnings: costs incurred with the expectation of future benefits, thus, expected benefits must exceed costs. Expected returns to education and training investments (human capital) are in the form of: higher future earnings. Increased job satisfaction: more responsibility autonomy etc, a greater appreciation of non-market activities and interests, reading, internet etc. Simplifying assumptions: no direct (consumption) utility or disutility from education, hours of work are fixed. Income streams associated with education amounts are known.
