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Where Are We Now with Human Capital Theory in Australia?

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  • Preston, Alison

Abstract

The dominant economic paradigm for the study of wage determination is the human capital model. Increasingly, however, there is growing discontent with this model. The catalyst is the empirical literature on important earnings relationships which cannot be explained by competitive wage theory. Is human capital theory redundant? How useful is the model in the 1990s? This paper provides an assessment of the current status of human capital theory in Australia. The analysis demonstrates that even in a non-competitive environment such as Australia the human capital framework is extremely useful for the study of wage determination. Its weakness is its inability to explain significant and persistent inter-industry, inter-occupational and gender wage differences. Copyright 1997 by The Economic Society of Australia.

Suggested Citation

  • Preston, Alison, 1997. "Where Are We Now with Human Capital Theory in Australia?," The Economic Record, The Economic Society of Australia, vol. 73(220), pages 51-78, March.
  • Handle: RePEc:bla:ecorec:v:73:y:1997:i:220:p:51-78
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    References listed on IDEAS

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    1. Martin Eichenbaum & Charles L. Evans, 1995. "Some Empirical Evidence on the Effects of Shocks to Monetary Policy on Exchange Rates," The Quarterly Journal of Economics, Oxford University Press, pages 975-1009.
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