1. Business
  2. Economics
  3. for the following three different conceptions of the human capital...

Question: for the following three different conceptions of the human capital...

Question details

For the following three different conceptions of the human capital model, draw earnings profile graphs (with wage on the y axis and time on the x axis). Treat education as binary (so you either get education or dont) and draw earnings profiles for educated and non-educated people separately. In each case, assume that educated people stay in school from time 0 to time S and then graduate and are in the labor force. We are considering three different human capital models. In each, schooling is a binary choice, and time is continuous. Students are in school until time S, and then have graduated afterwards. Draw earnings profiles for both educated and non-educated people. Then, shade in separate areas. One is the opportunity cost of education, which represents the amount of earnings that educated people give up early in life, before the point where they start making more than non-educated people. The other is the lifetime earnings premium, which represents the additional earnings that educated people make later in life. For simplicity, wage growth will be linear in all cases, and assume that at time 0, wages are 0. Students earn no money while in school, and after school, educated wages jump up above non-educated wages, then both grow at the same rate Students receive a lower rate of wage growth than the uneducated while in school, and then a higher rate of wage growth after school. Theres a small jump in wages at graduation, but at graduation, wages are still lower than uneducated wages Educated wages are negative and flat while in school because of tuition payments. Then, wages jump up and grow at a faster rate than non-educated wages (while student loans are paid off). Then, after loans are paid off, wages jump up again. Wages should be lower for educated than non-educated as long as loans are still being paid off a. b. c.

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution