Schooling as a risky investment

Hartog, J.

2005 | 40 pagina's | ISBN 90-6984-446-X | Euro 12,00

The basic human capital model explains higher wages for longer education as a compensation for postponing work and hence earnings. This model is briefly discussed, both in theoretical and empirical perspective, and then extended to allow for uncertainty about the wage to be earned after completing an education. The author summarizes research that shows higher wages in educations with greater wage variance and lower wages for greater asymmetry in the wage distribution. Both findings fit in with the standard theory on individuals' attitudes towards risk.