Over-education for the rich, under-education for the poor: a search-theoretic microfoundation
AbstractThis paper studies the efficiency of educational choices in a two sector/two schooling level matching model of the labour market where a continuum of heterogenous workers allocates itself between sectors depending on their decision to invest in education. Individuals differ in ability and schooling cost, the search market is segmented by education, and there is free entry of new firms in each sector. Self-selection in education originates composition effects in the distribution of skills across sectors. This in turn modifies the intensity of job creation, implying the private and social returns to schooling always differ. Provided that ability and schooling cost are not too positively correlated, agents with large schooling costs — the ‘poor’ — select themselves too much, while there is too little self-selection among the low schooling cost individuals — the ‘rich’. We also show that education should be more taxed than subsidized when the Hosios condition holds.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 3624.
Date of creation: 2006
Date of revision: Apr 2007
Ability; Schooling cost; Heterogeneity; Matching frictions; Efficiency;
Other versions of this item:
- Charlot, Olivier & Decreuse, Bruno, 2010. "Over-education for the rich, under-education for the poor: A search-theoretic microfoundation," Labour Economics, Elsevier, vol. 17(6), pages 886-896, December.
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
- I20 - Health, Education, and Welfare - - Education - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-23 (All new papers)
- NEP-DGE-2007-06-23 (Dynamic General Equilibrium)
- NEP-EDU-2007-06-23 (Education)
- NEP-HRM-2007-06-23 (Human Capital & Human Resource Management)
- NEP-LAB-2007-06-23 (Labour Economics)
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