Essay, Research Paper: Economics Education

22
education affects labor supply only via its effect on wages; in the
literature on the return to education it allows unbiased estimates
to be obtained from selected samples; and it substantially reduces
the extent to which income taxation discourages human capital
accumulation, and hence the extent to which taxation retards
transitional and/or endogenous growth.
This paper used a very simple, but compelling, model (i.e., the
conclusion is not due to the simplicity of the model) to demonstrate
that education and work decisions are likely to be mutually
dependent. That is, optimizing behavior implies that individuals are
likely to have positive correlations between investment in human
capital and work. Moreover, simple statistical modelling across
extensive micro datasets strongly supports the theory, and indicates
that it is an empirically important phenomenon. To illustrate the
order of magnitude involved, the male correlation in the U.S.
suggests that a college degree relative to a high-school diploma has
roughly the same correlation with hours of work as being male
relative to female.



Bibliography


, Colm Harmon, and Hessel Oosterbeek, "A Review of the
Schooling/Earnings Relationship with Tests for Publication
Bias" NBER Working Paper 7457, 2000.
Altonji, Joseph G, "Intertemporal Substitution in Labor Supply:
Evidence from Micro Data" Journal of Political Economy, June
1986, 94(3), S176-215.
Barro, Robert J and Xavier Sala-i-Martin, Economic Growth, New York:
McGraw-Hill, 1995.
Becker, Gary S, "A Theory of the Allocation of Time" Economic
Journal, September 1965, 75(2), 493-517.
, Human Capital, 3rd ed, Chicago: University of Chicago


Word Count: 168