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Does the Human-Capital/Educational-Sorting Debate Matter for Development Policy?

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  • Kevin Lang

Abstract

If education increases human capital, subsidizing education can generate economic growth and combat poverty. Estimates of its return suggest that education is a good social investment. In sorting models, the return reflects in part the information about productivity revealed by the worker's education. Thus the social and private returns diverge. It might appear that if we believe the sorting model, we should be less swayed by evidence that estimated returns to education exceed the social discount rate, and therefore less likely to support education-based development policies. This conclusion is shown to be incorrect.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4052.

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Date of creation: Apr 1992
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Publication status: published as American Economic Review, Vol. 84, no. 1 (1994): 353-358.
Handle: RePEc:nbr:nberwo:4052

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  1. Lang, Kevin, 1987. "Pareto Improving Minimum Wage Laws," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 25(1), pages 145-58, January.
  2. Joseph E. Stiglitz, 1973. "The Theory of 'Screening', Education, and the Distribution of Income," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 354, Cowles Foundation for Research in Economics, Yale University.
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Cited by:
  1. Strobl, Eric, 2003. "Is Education Used as a Signaling Device for Productivity in Developing Countries? Evidence from Ghana," IZA Discussion Papers 683, Institute for the Study of Labor (IZA).
  2. Andrew Weiss, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 9(4), pages 133-154, Fall.
  3. Norman Ireland & Robin A. Naylor & Jeremy Smith & Shqiponja Telhaj, 2009. "Educational Returns, Ability Composition and Cohort Effects: Theory and Evidence for Cohorts of Early-Career UK Graduates," CEP Discussion Papers dp0939, Centre for Economic Performance, LSE.
  4. Brown, Sarah & Sessions, John G., 2006. "Evidence on the relationship between firm-based screening and the returns to education," Economics of Education Review, Elsevier, Elsevier, vol. 25(5), pages 498-509, October.
  5. Self, Sharmistha & Grabowski, Richard, 2006. "The Asian Financial Crisis: Impact on Human Development," Review of Applied Economics, Review of Applied Economics, Review of Applied Economics, vol. 2(2).
  6. Stephan O. Hornig & Horst Rottmann & Rüdiger Wapler, 2009. "Information Asymmetry, Education Signals and the Case of Ethnic and Native Germans," CESifo Working Paper Series 2683, CESifo Group Munich.
  7. Patrick J. Bayer & Peter Arcidiacono & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," Working Papers, Duke University, Department of Economics 10-51, Duke University, Department of Economics.
  8. Borghans,L. & Grip,A.,de, 1999. "Skills and low pay: upgrading or overeducation?," ROA Research Memorandum, Maastricht University, Research Centre for Education and the Labour Market (ROA) 005, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  9. Anupa Bir & Karen Eggleston, 2003. "Physician Dual Practice: Access Enhancement or Demand Inducement?," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0311, Department of Economics, Tufts University.
  10. Tomás Rau & Eugenio Rojas & Sergio Urzúa, 2013. "Loans for Higher Education: Does the Dream Come True?," NBER Working Papers 19138, National Bureau of Economic Research, Inc.
  11. John H. Tyler & Richard J. Murnane & John B. Willett, 1998. "Estimating the Impact of the GED on the Earnings of Young Dropouts Using a Series of Natural Experiments," NBER Working Papers 6391, National Bureau of Economic Research, Inc.
  12. Brown, Sarah & Sessions, John G., 1999. "Education and employment status: a test of the strong screening hypothesis in Italy," Economics of Education Review, Elsevier, Elsevier, vol. 18(4), pages 397-404, October.

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