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Investments in human capital, wage uncertainty, and public policy

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Author

Summary, in English

The importance of risk characteristics of human capital for the design of tax and education policy is explored. Wages are uncertain and education, while increasing the expected wage, may increase or decrease wage variance. The government has strong reasons to encourage human capital formation in the latter case, partly due to the insurance effect of human capital, and partly due to the way the individuals-under a plausible restriction on 'prudence'-respond to changes in risk. The analysis is illustrated using two models of education: one where education helps the individuals make better occupational choices, and a standard risk-augmented Becker-type model.

Publishing year

2003

Language

English

Pages

1521-1537

Publication/Series

Journal of Public Economics

Volume

87

Issue

7-8

Document type

Journal article

Publisher

Elsevier

Topic

  • Economics

Keywords

  • prudence
  • wage uncertainty
  • social insurance
  • education

Status

Published

ISBN/ISSN/Other

  • ISSN: 0047-2727