Term 2 - Chapter 5 & Chapter 6 Flashcards
Draw the basic model of human capital graph
Look at notes
What is the PV equation?
Notes
What is the IRR equation?
K/C
Apply the IRR equation to education
K = 27,000-17,000 = 10,000
C = 3x17,000 = 51,000
IRR = 20%
Draw the supply and demand graph for human capital
Notes
Draw the age and human capital graph and explain
Notes
Draw the ability, wealth and gender graph and explain
Notes
Children’s ability develops in the womb meaning what?
Even fetal growth is lower in poor families
Less reading to the child
Less visits to the library
More TV and going to bed later
Also single families: tend to lack work, be poor, cannot look after children and lay foundations for education
UK also has hug intergenerational earnings correlation, poor remain poor
Draw the social IRR graph and explain
Notes
Why do governments subsidise education?
External benefits: democracy and higher taxes
Equity: poor can’t fund themselves
What is the equation for social IRR?
Change in taxes over subsidy
Explain the social IRR
Social IRR includes more than extra taxes of course, since uni education helps democracy and reduces crime
Also more educated people might help less educated via the trickle down effect
The social IRR also misses the quality issue of uni, since it is bad for unis to depend too much on state handouts
- best unis are private like Harvard and the student reciprocate by not donating in later life
Explain what screening is?
Education is said to be merely a ‘signal’ of pre-existing productivity
But why do education earnings differentials remain for long service workers?
Identical twins studies show 10-15% IRR for education
Self employed have similar IRR to the employed
Draw the general training graph and explain
Notes
Draw the specific training graph and explain
Notes
Why does the UK have a large training policy?
U.K. Government believes there’s not enough training due to a fear of poaching
No notice is taken of sitting by nelly type training, certificates are the thing
What are the concerns regarding over education?
Government subsidies for higher education are about 2% of GDP, and big increase in university entry, particularly for women
Hence fears of overeducation = in some sense underutilisation of qualifications, I.e. Low IRR
But we see no fake in ‘graduate mark up’ (k) - compared to school leaving - it seems as though D has kept pace with S
Explain the relevance of computers to education
Computers might underlie the need for greater education - and hence the maintenance of the graduate premium even in the face of big rises in grads
Computers complement skilled workers, substitute for unskilled (similar to capital in general)
Summarise the information on human capital
IRR on human capital 10-15%, similar to physical capital - hence ‘human capital’ theory supported
IRR not driven by unmeasured ability, or ‘signalling’, but productivity. It is a CWD for sacrifices of becoming educated
Education important for taxation, democracy and growth
Need to equalise opportunities because of capital market imperfection
What’s the basic picture behind labour market discrimination?
Women earn less than men - tend to be in lower paying occupations
But even within occupations women earn less - partly because they work fewer hours
Women have interrupted wok careers: at age 30, women who are mothers earn 25% less and women who are not earn 10% less
Define discrimination
Unlike treatment of likes
Workers with identical productivity characteristics being paid less
Explain the theories behind discrimination
Employer ‘tastes’ against women/blacks - but why?
- consequence is lost profits ‘the discriminator pays’
Implication: employer discrimination more likely in monopoly, especially government (non-transferable)
Evidence: fewer women managers where regulation stops entry e.g. Banking
When US trucking deregulated, black-White wage gap decreased
UK police ‘institutionally racist’ but is this due to union?
Draw the employer taste discrimination graph and explain
Notes
Draw the employer and employee tastes discrimination graph and explain
Notes
Why is fellow worker discrimination more plausible than firm?
Since workers gain from excluding competition
The reason is taste not money
E.g. South Africa - White unions underpinned apartheid
Explain statistical discrimination
‘Stereotypes’ - judging by person’s group, e.g. Women live longer, so pension premiums should be higher - obviously atypical members lose out
Note use of ‘wrong’ or ‘noisy’ statistical tests will cause lost profits
Evidence: fake job application studies - Indians, Afro-Carribeans less likely to get offered job interviews, Australians more likely
Even greater variation in women (average the same) will cause them to earn less
What do segmented and dual labour markets depend on?
Depend on immobility and ‘crowing’
Women do a small range of jobs compared to men ‘occupational segregation’ - is this due to tastes or men?
Draw the measuring discrimination graph and explain
Notes
What are the explanations regarding differences in preferences?
Women less interested in money/leading, more in relationships
Preferences formed by parents - ‘pre-labour market’ discrimination?
Evidence: men 20 or 30 times more likely to go to prison
Explain when anti-discrimination law came into effect in the UK and subsequent issues that followed
U.K. did not have an anti-discrimination policy until required by the European Union in 1979 (equal pay act) and 1975 sex discrimination act…all merged into a new Equality Act 2010 which allows ‘positive action’ in hiring
Now a discrimination industry with anti age discrimination and disability discrimination
Draw the discrimination policy graphs and explain
Notes
Explain what ‘equal value’ in Birmingham means
Notes
Draw graphs illustrating how pensions can be calculated unfairly based on discrimination
Notes
