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A microfoundation for increasing returns in human capital accumulation and the under-participation trap

Booth, AL and Coles, M (2007) 'A microfoundation for increasing returns in human capital accumulation and the under-participation trap.' European Economic Review, 51 (7). 1661 - 1681. ISSN 0014-2921

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Abstract

This paper considers educational investment, wages and hours of market work in an imperfectly competitive labour market with heterogeneous workers and home production. It investigates the degree to which there might be both underemployment in the labour market and underinvestment in education. A central insight is that the ex post participation decision of workers endogeneously generates increasing marginal returns to education. Although equilibrium implies underinvestment in education, optimal policy is not to subsidise education. Instead it is to subsidise labour market participation which we argue might be efficiently targeted as state-provided childcare support. © 2007 Elsevier B.V. All rights reserved.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 18 Jul 2012 17:49
Last Modified: 17 Aug 2017 18:10
URI: http://repository.essex.ac.uk/id/eprint/3109

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