Labor Economics
8th Edition
ISBN: 9781260484434
Author: George Borjas
Publisher: Mcgraw-hill Higher Education (us)
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Question
Chapter 6, Problem 3RQ
To determine
The stopping rule for investments in education.
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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.
Discuss how empirical studies estimate the rate of return to schooling and the methods used to avoid the problem of ability bias.
Why does a worker allocate his or her time over the life cycle so as to work more hours in those periods when the wage is highest? Why does the worker not experience an income effect during those periods?
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- Determine the market demand for education.arrow_forwardWhat is the Relationship between Education and Human Capital?arrow_forwardThe 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_forward
- What happens to the probability that a particular person works when the wage rises? Does such a wage increase generate an income effect?arrow_forwardHow does a college education increase ones human capitalarrow_forwardHow does path dependency provide an explanation for differentiation in earnings between men & women?arrow_forward
- How does skill atrophy provide an explanation for differentiation in earnings?arrow_forwardImagine 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_forwardWhat is the effect of an increase in the price of market goods on a worker’s reservation wage, probability of entering the labor force, and hours of work?arrow_forward
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