Labor Economics
7th Edition
ISBN: 9780078021886
Author: George J Borjas
Publisher: McGraw-Hill Education
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Question
Chapter 6, Problem 3RQ
To determine
The stopping rule for investments in education.
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Discuss how empirical studies estimate the rate of return to schooling and the methods used to avoid the problem of ability bias.
Suppose that, on average, men earn $17 an hour and have an average of 15
years of schooling. Women earn $15 an hour and have an average of 14
years of schooling. If the estimated return to schooling for men is 0.30
(implying that each additional year of schooling translates into an additional
30 cents per hour) and the returns for schooling for women is 0.2, then the
gender gap in schooling explains:
10% of the wage gap between men and women.
20% of the wage gap between men and women.
30% of the wage gap between men and women.
15% of the wage gap between men and women.
What is the Relationship between Education and Human Capital?
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- The textbook discusses some strategies for correcting for ability bias when trying to estimate the rate of return to education. a) Explain ability bias. b) Discuss the method of using data on identical twins to control for ability bias. c) Discuss the method of using certain birth dates to control for ability bias. The Textbook: Labor Economics, 8th Edition, by George Borjas, published by McGraw-Hill.arrow_forwardIn what sense is education a type of capital?arrow_forwardHow does path dependency provide an explanation for differentiation in earnings between men & women?arrow_forward
- How does a college education increase ones human capitalarrow_forwardWhat factors do economists suppose influence the amount of education people choose to obtain? What are some events that could influence the decision in this framework?arrow_forwardSuppose the skills acquired in school depreciate over time, perhaps because technological change makes the things learned in school obsolete. What happens to a worker’s optimal amount of schooling if the rate of depreciation increases?arrow_forward
- Imagine that the wage-schooling locus is given by w(s)=s^(1/3). What will be the optimal level of education for an individual to take if next period’s earnings in any given time are worth 95% of current earnings for that individual? Answer is s=20/57 I need step by step calculationsarrow_forwardDiscuss how the wage-schooling locus is determined in the labor market, and why it is upward sloping and concave.arrow_forwardExplain why child labour could actually be pareto-optimal.arrow_forward
- Should Happiness be used as a measure of poverty also.Why or why not?arrow_forwardWhich theory does best explain the increasing trend in obesity in the past 150 years Decline in food prices Changes in the food industry Genetics Increase in women’s labor force participationarrow_forwardIn labor markets, risk taking accounts for some income differences. True Falsearrow_forward
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