Uncertainty and the Speciflcity of Human Capital (original) (raw)

Uncertainty and the specificity of human capital

Journal of Economic Theory, 2008

This paper studies the choice between general and specific human capital. A trade-off arises because general human capital, while less productive, can easily be reallocated across firms.

Human capital as a risky asset and the effect of uncertainty on the decision to invest

2006

In this paper, we analyse the human capital accumulation process over the life cycle of individuals under uncertainty. To do so, we develop a continuous time dynamic programming model which takes into account several sources of uncertainty, concerning the human capital accumulation process and the labour market. We also introduce some macro exogenous variables to take into account intertemporality of decisions. We first determine the structure of human capital investment in a general setting. Then, we specify individual preferences to obtain explicit solutions, and we produce an in-depth study of each source's effect of uncertainty on human capital investment. As a special case of state variable, we explicitely take into account unemployment risk. We show that the global effect of uncertainty is negative, except if a sufficiently high risk premium exists.

Growth and Human Capital Accumulation under Uncertainty

RePEc: Research Papers in Economics, 1998

The aim of this paper is to understand the role of uncertainty i n education choices and therefore in growth. We consider an overlapping generations model in which endogenous growth is introduced through human capital accumulation. We i n troduce uncertainty as to the individual returns to educational investment, and we assume markets to be incomplete. We study the e ect of this uncertainty on the behavior of the risk averse individual regarding his e ort in education. The analysis is carried out within a general equilibrium approach.

Human Capital and Growth in Japan Since 1970: Converging to the Steady State

2014

Economists have struggled to explain Japan’ continuing low growth rate since 1991. I show that a dynamic Solow annual growth model, augmented with human capital, labor-hours worked, and oil prices, explains Japan’s annual rates of growth during 1970-2007, including the rates since 1991. The model’s results indicate that since 1970 Japan has been converging to a steady-state growth rate of about 1.0%/year. The results also indicate that rising average schooling attainment raised annual growth above the steady-state rate by 1.0% in 1970, but by only 0.2% in 2007.

Optimal investment in human capital under uncertainty

Economics of Education Review, 1992

In this paper we extend the standard human capital model with the probability of becoming unemployed and uncertainty about future earnings. Our analysis deviates from earlier human capital cum uncertainty models in assuming risk neutral decision-makers. This allows a straightforward comparison with the standard model and also facilitates calculations of unemployment and uncertainty accounted rates of return to education. The comparative statics of the model reveal that only the effect of changes in the earnings distribution can be signed unambiguously: greater dispersion in earnings by schooling level reduces the returns to schooling. The empirical illustrations suggest that accounting for uncertainty and the probability of becoming unemployed slightly equalizes differences in the rates of return for different levels of schooling.

Idiosyncratic risk, investment in human capital, and growth

2001

We investigate the aggregate implications of individual speci…c uncertainty about returns to investment in education in the absence of insurance markets. We do so in a general equilibrium OLG model in which physical resources must be devoted to education in order to accumulate human capital. We conclude that uncertainty with incomplete …nancial markets may strongly a¤ect individual behavior but not the aggregate of the economy. Di¤erent degrees of uncertainty will induce di¤erent intensities of human to physical capital but will not have a signi…cant impact on the long run growth rate of the economy.

Human capital and economic development

Journal of Development Economics, 2006

This paper develops a general equilibrium model of fertility and human capital investment under uncertainty. Uncertainty exists in the form of a probability that a young adult does not survive to old age. Parents maximize expected utility arising from own consumption, their fertility, and the discounted utility of future generations. There exists a precautionary demand for children. Young adult mortality is negatively related to the average human capital of young adults. Therefore, rising human capital leads to falling mortality, which eventually induces a demographic transition and an acceleration in human capital investment. The model can fit data on world and country populations, per capita incomes, age at entry into the labor force, total fertility rates, life expectancy, conditional life expectancy, and infant mortality.

Human capital accumulation over the life cycle under multiple sources of uncertainty

2004

In this paper, we analyse the human capital accumulation process over the life cycle of individuals under the hypothesis of earnings uncertainty. To do so, we develop a continuous time dynamic programming model which takes into account several sources of uncertainty, concerning the human capital accumulation process and the labour market. In particular, the risks over future wage rates and

The Effect of Wages on Human Capital and its Virtuous Dynamic Cycle

Revista Finanzas y Política Económica

This paper provides economic theory with a dynamic structural model that mathematically proves both a positive effect of wages on the workers’ human capital intertemporal investment decisions and the existence of a virtuous dynamic cycle between wages and human capital.Among the desired characteristics of the proposed model is that it has an analytical solution, permitting the achievement of an optimal decision rule for each choice variable and the calibration of its parameters using observed data; this favors an easy implementation by policymakers and researchers. The constructed statistics and the results of the empirical application of the model, to the Mexican developing economy, support the mathematical conclusions. The model predicts two benchmark human capital gross returns and their corresponding wages, by levels of education. Below the second one, human capital coming from formal education vanishes over time, due to investment not being enough to offset its depreciat...