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Search equilibrium and social and private returns to education

  • Holzner, Christian
  • Launov, Andrey

Social and private returns to education are computed using the structural estimates of an extended Burdett-Mortensen search equilibrium model. The extension includes different skill groups linked via a production function with variable degree of homogeneity, allowing thereby for a unimodal earnings density with a decreasing right tail. We find that the decreasing unemployment risk for higher skill groups and the absence of tuition fees in Germany increase private returns and lead to a too large share of high skilled individuals in the workforce, which is suboptimal from the social point of view.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 54 (2010)
Issue (Month): 1 (January)
Pages: 39-59

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Handle: RePEc:eee:eecrev:v:54:y:2010:i:1:p:39-59
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  18. Zvi Eckstein & Kenneth I. Wolpin, 1999. "Why Youths Drop Out of High School: The Impact of Preferences, Opportunities, and Abilities," Econometrica, Econometric Society, vol. 67(6), pages 1295-1340, November.
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