Showing papers on "Human capital published in 1984"

Job Assignments, Signalling, and Efficiency

Abstract: This article analyzes a model in which information about a worker's ability is only directly revealed to the firm employing the worker; other firms, however, use the worker's job assignment as a signal of ability Three results recur throughout the analysis First, wage rates tend to be more closely associated with jobs than with ability levels Second, there is frequently an inefficient assignment of workers to jobs (ie, even when a firm has complete information about a worker's output) Third, the severity of this inefficiency tends to be negatively correlated with the level of firm-specific human capital in the economy

The Demand for Labor in the Long Run

Abstract: The theory of the demand for labor is presented along with a catalog and critique of methods that are used to estimate the parameters that describe empirical labor-demand and substitution possibilities. A critical survey is presented of studies of own-price demand elasticities for labor as a whole and for workers categorized by demographic group, of substitution parameters among workers of different types, and of workers for capital. The main findings are: 1) The long-run constant-output demand elasticity for labor that istreated as homogeneous is between .15 and .5; 2) Own-price demand elasticities are higher for workers that have less general human capital embodied and them; 3) Skilled labor and physical capital are p-complements; and 4) More tentatively, youths and wornenare q-substitutes in production. The implications and importance for policy of these and other results are discussed. Suggestions for improving the literature and narrowing the range of knowledge of the underlying parameters, especially by concentrating more on disaggregated and even microeconornic data, are presented.

Incentives, Productivity, and Labor Contracts

Abstract: The relationship between age-earnings profiles and worker incentives is examined by contrasting wage and salary workers with the self-employed. It is argued that the steepness of wage and salary workers' age-earnings profiles reflects the desire to provide work incentives to those workers. Since self-employed workers do not face this agency problem, they are used as a benchmark to gauge productivity. Empirical support of the proposition is provided, and the effects of human capital accumulation are separated empirically from incentive effects. The most important conclusion is that under some strong assumptions, most of the slope in age-earnings profiles is accounted for by the desire to provide incentives, rather than by on-the-job training.

The Demand for Labor in the Long Run

Abstract: The theory of the demand for labor is presented along with a catalog and critique of methods that are used to estimate the parameters that describe empirical labor-demand and substitution possibilities. A critical survey is presented of studies of own-price demand elasticities for labor as a whole and for workers categorized by demographic group, of substitution parameters among workers of different types, and of workers for capital. The main findings are: 1) The long-run constant-output demand elasticity for labor that istreated as homogeneous is between .15 and .5; 2) Own-price demand elasticities are higher for workers that have less general human capital embodied and them; 3) Skilled labor and physical capital are p-complements; and 4) More tentatively, youths and wornenare q-substitutes in production. The implications and importance for policy of these and other results are discussed. Suggestions for improving the literature and narrowing the range of knowledge of the underlying parameters, especially by concentrating more on disaggregated and even microeconornic data, are presented.

Race and Human Capital

Abstract: While human capital has been used with some success to analyze recent changes in racial income differences, scholars have repeatedly pointed to a major empirical problem that appears to severely limit the historical relevanlce and scope of skill-based theories as applied to racial questions. The challenge they raise is legitimate. Put simply, if measured skill disparities between the races narrowed throughout the twentieth century, why did income ratios first begin to converge in the 1960's? In this paper, I address this question relying on some unexploited census data by race on education, literacy, occupations, and income. Using these data that begin with the 1890 Census, I present new estimates of agespecific relative income positions of black men for all postslavery birth cohorts. In addition to reconciling the apparently inconsistent skill and income series, these income ratios offer a very different historical record than many economists believe to have been the case. To cite a prominent example, Gunnar Myrdal's classic work (1944) saw the economic position of his contemporary black America not only as dismal, but made even more so by its sense of hopelessness, given the absence of any hint of progress or change. While Myrdal's pessimism is understandable, it appears that even in his day seeds had long been sown that were already permanently altering and improving the relative economic status of black men.

A Formulation of the Earnings Function using the Concept of Occupational Investment.

Abstract: Standard models of income determination specify income to be a function of two variables that measure postschool investment-the years of labor market experience and the years of employer tenure. This investigation develops a better proxy for general human capital investments by hypothesizing that the intensity of investment varies by occupation and that a proportion of the occupational skills are transferable with occupational change. After developing exogenous measures of these features, the occupational investment variable is calculated for the young men of the National Longitudinal Survey. Empirical work demonstrates that occupational investment is a strong determinant of income-far superior to the experience variable.

The contribution of education to economic growth : international comparisons

Abstract: Since the concept of human capital was invented (or perhaps reinvented) in the late 1950s, the authors have been flooded with papers written about the contribution of education to economic growth. After a rather long pause in the 1970s, triggered by lack of economic growth and ambivalence about the role of education in development, the topic has begun attracting renewed interest. In this paper the author first summarize past efforts to estimate the contribution of education to economic growth. Then the author augment and reinforce this evidence by examining recent related analyses of the role of education in society that do not formally come under the popular heading of the contribution of education to economic growth. The paper concludes with a response to recent attacks on the economic value of education, especially with reference to developing countries.

Estimating the parameters of a household production function with joint products

Abstract: By estimating the parameters of a production function whose inputs consist of family time and market goods, the authors offer some new microeconomic estimates of the value of production that takes place in the home and also examine the concept of joint production-that is, the degree to which time devoted to home production simultaneously serves as leisure. They find evidence of substantial jointness between home production time and leisure, the degree of which is greater for wives than for husbands; and that both husband and wife possess human capital skills more productive in market work than in home work.

Earnings Inequality among Males in the United States: Trends and the Effect of Labor Force Growth

Abstract: We analyze the variance of log earnings within labor force cohorts of U.S. males with particular attention to the influence of labor force growth rates. Estimates with data from the 1968-79 current population surveys reveal increases in earnings inequality within labor force cohorts even after we control for the level of education, experience, and unemployment. A model of human capital investment is used to analyze differences among cohorts in the life-cycle profile of the variance of log earnings. It is shown that a pattern of sharply increasing and then declining labor force growth rates will tend to raise the return on human capital investment and thereby increase the variance of postschooling investment and log earnings early in the life cycle. This positive effect on relative earnings inequality should decline with experience and possibly become negative. Because of the post-World War II baby boom and baby bust, recent labor force entrants have faced just such a pattern of actual and projected labor ...

Household Production in the Philippines: A Non-Neoclassical Approach

Abstract: The starting point of any economic analysis is a microeconomic theory of the decision-making unit. By providing a set of explicit assumptions regarding individual choices, a microeconomic theory lays the necessary foundation for the explanation of economic behavior. Just as a theory of the firm underlies analyses of market production, a theory of the family underlies analyses of household production. Explanations of long-run trends such as fertility decline grow out of assumptions regarding the nature of household decision making. Developing what they term "the economic approach" to human behavior, Gary Becker and other neoclassical economists forcefully argue that household behavior is motivated primarily by a collective concern for economic efficiency.' They assume that households seek to maximize exogenously given joint utility functions, and they hypothesize that differences in household behavior represent efficient responses to differences in the prices and incomes which households face. This approach provides the foundation for an explanation of fertility decline based on long-run changes in relative prices associated with economic development. Simply stated, the argument runs as follows. As the rate of return to human capital rises and levels of education increase, the cost of rearing children goes up. As higher wages draw women out of the household into the labor force, the opportunity cost of mothers' time goes up, further increasing the cost of children. The demand for children decreases, and fertility levels gradually adjust.2 The assumption that joint utility functions are exogenous constant over time, and vary randomly, if at all, across households, is crucial to this argument. Systematic differences in unobservable joint utility functions could seriously confound the interpretation of observed relationships between changes in household behavior and changes in rela-

The screening hypothesis: an application of the wiles test

Abstract: According to Wiles (1974) the screening and human capital theories of the return to education may be discriminated between by determining whether qualified individuals earn more by working in areas where their skills are relevant, than they earn in other areas. Failure to do so is presumed to constitute evidence against human capital theory. This paper applies the Wiles' test to a census of recent Economics and Science graduates from Australian Universities. Only for male science graduates is any evidence found in favour of human capital theory.

Do Minority/White Unemployment Differences Really Exist?

Abstract: We develop a model of labor force status (federal employment, nonfederal employment, unemployment, and out of the labor force) that depends on human capital variables, local labor market conditions, and personal characteristics. According to the estimated model for white non-Hispanic males and females a substantial difference exists between blacks and white non-Hispanics even after correction for the control variables. However, the control variables explain almost all of the difference between Hispanics and white non-Hispanics.

State-dependent utility, the demand for insurance and the value of safety

Abstract: How much should a society spend for the safety of its members? The paper treats that question within the framework of the theory of public expenditures. The methodological foundations of the subjective approach, which underlies the concept of marginal willingness-to-pay for safety, are reviewed. The paper also includes a complete study of the individual demand for life insurance and for (private) safety.

Teaching and Research: The Human Capital Paradigm

Abstract: The authors analyze why research is rewarded in academic institutions where teaching is the primary concern and suggest why even publication in obscure journals may serve as a measure of the worth of an instructor to teaching institutions.

The impact of social support networks on adult health.

Abstract: Knowledge of the determinants of adult health offers important implications for planning policy that may affect the overall level of health and thus the costs of health care. One potentially important factor that has not been incorporated in previous research is the amount of information individuals have concerning health care or methods of preventive care. This study uses the number of social support networks and the degree of contact individuals have with them as an alternative measure of information. This measure of information is incorporated into an economic model based partly on Becker's Human Capital framework. Social support networks are found to have virtually no impact in explaining health outcomes for illnesses over which the individual has little control. However, when a broader range of illnesses is considered, social support networks do play a role in producing better health.

Major Theories of the Labour Market and Women's Place Within It

Abstract: Within the labour market, female employees are over-represented in particular industries and occupations They tend to receive lower pay than male workers and tend to occupy lower positions of status and power Four major theoretical schools that attempt to explain these patterns are critically examined These are the neo classical economists in the human capital school; dual labour market theorists; labour market segmentation theorists; and feminists who use the term 'reserve army' It is argued that the sexual division of labour is best understood by seeing the labour market as a structure of power where buyers and sellers of labour come to agreements over wages and work place organisation Because of the unequal domestic division of labour, gender is a highly significant determinant of bargaining power So is education More empirical and historical studies of the state and service sectors need to be undertaken and would undoubtedly shed more light on the distor tions in existing labour market theories

A Test of Dual Labor Market Theory

Abstract: Despite substantial differences in their views of the appropriate policy response to the existence of poverty, neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis.This paper presents a test of the two central propositions of dual market theory -- 1) the existence of two distinct labor markets with different wage setting mechanisms and 2) the existence of barriers to mobility between the labor markets. We find considerable support for both hypothesis. Estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations. The one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience. The other equation is flat with no returns to human capital. These two equations resemble the predictions of dual market theory for the "primary" and "secondary" markets respectively. Further, we present evidence that(at least) some non-white workers are involuntarily confined to the secondary market. This crowding of minority workers into the low wage labor market accounts for a substantial portion of white/non-white wage differences. We interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels. In addition, combining the efficiency wage argument with the observation that much of the white/non-white wage difference is explained by the exclusion of non-whites from the primary sector suggests an explanation for the persistance of wage differences.

Chinese Educational Policies in the 1980s and Economic Development

Abstract: Like other Chinese state institutions, the educational system has undergone many changes since the death of Mao Zedong and the overthrow of the “gang of four” in 1976. Several accounts and studies have appeared treating different stages and aspects of this continuing transformation. Further adjustments to the system of education are likely to take place in the near future. Now that the Sixth Five-Year Plan has been published in draft form laying down the blueprint of China's development in the coming few years, some kind of assessment needs to be made of the; educational system, its performance and its prospects, since much of they immediate and future operation of rapid economic growth depends on U ithe human capital provided by schools.

Investment in human and nonhuman capital, transfers among siblings, and the role of government'

Abstract: The implications for efficient allocation of parents' inability to force transfers among siblings are explored. When there are differences in abilities of children within families, such transfers may be necessary to achieve a first-best solution. In the absence of such transfers, a tax on earned income and a subsidy to inheritance are useful second-best tools, whereas subsidies to investments in human capital or physical capital are not desirable.

Structure, Process, and the Labor Market

Abstract: In the late 1960s, attention focused on the persistence of poverty and of income differentials on the basis of sex and (especially) race. Neoclassical economic theorists such as Becker (1957) held that such differentials were the results of tastes for discrimination that were uneconomic and, thus, that they would tend to be eroded by the forces of competition. Another branch of standard economic theory, once again led by Becker (1964), held that poverty and racial differentials in income stemmed heavily from differences in human capital. This implied that improved education and training programs should enable poverty and racial differentials to be reduced.

The Demand for Tertiary Education--An Australian Study.

Abstract: In this article the demand for tertiary education by successful Higher School Certificate Candidates in Victoria is modelled along the lines of Handa and Skolnik (1975). This particular component of the overall demand is studied because of the particularly plentiful and accurate information available. The estimated effect of youth unemployment on demand raises a number of interesting hypotheses related to the traditional human capital variables of opportunity cost of education and expected future returns. These hypotheses are evaluated using the developed demand model.

Gender and class in Marshall's Principles of Economics

Abstract: Marshall held that economics is a positive and not a normative science1 and emphasised the scientificity imponed to the discipline's approach and object by the measurability of the phenomena observed,2 this measurability being afforded (and limited) by the use of money in economic transactions and decision-making.3 Marshall's marginalist model rests on the assumption of individualistic rational economic behaviour, a behaviour directed at 'the attainment and ... the use of the material requisites of well being' (p. 1) involving marginal calculations by the individual to reach a welfare optimum. In this model, income shares—and wages—are determined by the marginal product of the individual factors of production. Market mechanisms allow the maximisation of economic returns and the optimal state of economic welfare at the level of the nation and beyond. Yet Marshall departs from that model in at least two instances. In particular, the unit to be considered for consumption, welfare decisions, income levels, etc... in many cases is not the individual, but the family. Interestingly, individualistic (selfish) economic motivations break down within the family unit, especially in the case of inter-generational transfers (p. 24). Elsewhere, Marshall breaks with the market-orientated laissez-faire tradition when he approves of state intervention (Factory Acts) and advocates further state involvement in the economy (education, family wage...). As we shall see, these divergences from the model find a unity in the economist's treatment of the role of women in a capitalist economy. Marshall's argument about women rests on his development of a 'human capital' theory in Book IV of his Principles. His intent there is to provide advice on how to improve the productivity of the working class. Education is a major element in his proposal. But, to enhance the environment in which male workers and their children live, and to generate greater health, 'character and ability', working-class women are required to build a 'true home'. Marshall therefore opposes employment for married women and advocates a 'family