Human Capital Theory

Directions: Answers must thoroughly address the question, and are to be type written, except for the graphs, which can be hand written. The prose should be well-written with proper grammar and sentence structure. The graphs are to be clearly constructed with all parts of the graphs labeled and arrows that show appropriate shifts in supply and demand curves. The possible grades on the assignment are 10, 7.5, 5, 2.5, or 0. A hard copy of the assignment is to be handed into me at the first of class on the due date.

1. Use the schooling model (i.e. the model using hypothetical age-earnings profiles for college and high-school educated workers) to assess changes in costs and benefits to a potential human capital investment in a college education under the following scenarios.
a. Tuition is increased substantially
b. Extremely high unemployment rates for less-skilled (high-school educated) workers persists.
c. Marginal tax rates on high earners (such as those with a college degree) are decreased.
Hint: when using the schooling model, specifically address the following:
1) How are the age-earnings profiles affected?
2) What will happen to costs associated with obtaining the additional schooling?
3) What will happen to benefits from the additional schooling?
4) What will happen to the probability that a prospective student will decide to pursue a college education?
2. Floyd is now working on a job that pays $8,000 per year. He is contemplating a full-time one-year automobile mechanics course that entails costs of $1,000 for books and tuition. Floyd estimates that the course will increase his income to $13,000 in each of the three years following completion of the course. At the end of those three years, Floyd plans to retire to a commune in Boulder, CO. The current interest rate is 10 percent. Is it economically rational for Floyd to enroll in the course? Explain.

3. Generally firms are thought to be reluctant to pay for general human capital. After comparing general training with firm-specific training,

a. Use the model presented in class to explain why firms are predicted to avoid paying for (investing in) general skills.
b. Suppose a minimum wage is in place that does not allow firms to pay low wages during the training period, use the model to predict what will happen to the amount of general training the firm can profitably offer.
c. Given the model you just outlined in part a, how could a firm possibly justify a tuition reimbursement policy, which in essence pays workers to obtain general training?

ORDER THIS ESSAY HERE NOW AND GET A DISCOUNT !!!