EconStor >
Forschungsinstitut zur Zukunft der Arbeit (IZA), Bonn >
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/33522
  
Title:Increasing returns to education and the skills under-investment trap PDF Logo
Authors:Booth, Alison L.
Coles, Melvyn G.
Issue Date:2005
Series/Report no.:IZA Discussion Papers 1657
Abstract: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
JEL:H24
J13
J24
J31
J42
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

Files in This Item:
File Description SizeFormat
495036269.pdf273.13 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/33522

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.