LT Topic 1: Human Capital

Question 1

Two-choice schooling model: assumptions

Answer 1

Question 2

Two-choice schooling model: graph

Answer 2

Question 3

Two-choice schooling model:

Compare the PV of both income streams (educated vs uneducated)

Answer 3

Question 4

Continuous-choice schooling model:

Wage-schooling locus

Answer 4

Question 5

Continuous-Choice Schooling model:

State the PV of earnings after s years of school

Answer 5

Question 6

Continuous-Choice Schooling model:

Derive the PV of earnings after s years of school

Answer 6

Question 7

Continuous-Choice Schooling model:

From the FOC of PV of earnings of s years of schooling, show MRR = r

Answer 7

Question 8

Explain the stopping rule

Answer 8

Question 9

The determinants of schooling decision:

Why do people make different educational choices?

Answer 9

• Differences in the rate of discount
• Differences in ability

Question 10

The determinant of schooling:

Graphically show the difference in rate of discount:

1) Rate of interest vs years of schooling
2) Dollars vs years of schooling

Answer 10

Question 11

Reasons of different abilities

Impact of MRR if have higher ability

Answer 11

Question 12

Graphically show the difference in ability:

1) Rate of interest vs years of schooling
2) Dollars vs years of schooling

Answer 12

Question 13

The economic of schooling - Summary

Answer 13

Question 14

Measurement of MRR - formula

Answer 14

Question 15

Estimate the rate of return to schooling:

Regression formula

Answer 15

Question 16

Estimating the return to schooling:

Jacob Mincer equation

Question 17

Why is the return of education smaller in the specification without experience?

Answer 17

Question 18

Explain ability bias

Answer 18

Question 19

Ability bias regression model:

True and estimated equation

Answer 19

Question 20

Methods to find the causal relationship between earnings and education

Answer 20

Question 21

Explain the experiment:

Proxy for ability - IQ test

What could be wrong with the IQ test?

Answer 21

Question 22

Conditions for instrumental variables

Answer 22

Question 23

Explain the experiment:

Instrumental variable to estimate the ability bias

Answer 23

Question 24

Is the IV of compulsory schooling laws in the US a good IV?

Answer 24

Question 25

Placebo exeriment for the instrument used by Angrist and Krueger (1991), i.e. compulsory schooling law in the US

Answer 25

Question 26

Biases in Instrument Variable in assessing ability bias

Answer 26

Question 27

Explain twin studies in assessing ability bias

Answer 27

Question 28

Equations of twin studies in assessing ability bias

Answer 28

Question 29

Add family fixed effect in the twin studies equation

Answer 29

Question 30

Factors affect the quality of schooling

Answer 30

Question 31

Experiment showing the relationship between quality of schooling vs wages

Answer 31

Question 32

Summary of school quality experiment

Answer 32

Question 33

Assumptions of signalling model

Answer 33

Question 34

The signalling model

Sceniaro 1: Observable ability

Answer 34

Question 35

The signalling model

Sceniaro 2: asymmetrics information (pooling equilibrium)

Answer 35

Question 36

The signalling model

Sceniaro 3: Separating Equilibrium

Answer 36

Question 37

Evaluation of separating equilibrium

Answer 37