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Easy-Come-Easy-Go: Moral Hazard in the Context of Return to Education

  • Rosemary Walker


  • Liviu Florea


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    This empirical study advances the understanding of the theory of investment in human capital by outlining limitations to its applicability in the context of return to education. The study uses the concept of moral hazard to examine circumstances when financial support for education purpose generates less desirable post-graduation incomes. This study explores the relationship between financial support and post-graduation incomes using data from the Survey of Income and Program Participation that is designed to measure the economic situation of individuals. Results suggest that students are less likely to engage in moral hazardous behavior to the degree to which they are older and to the degree to which they receive costlier financial assistance. Copyright Springer Science+Business Media Dordrecht 2014

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    Article provided by Springer in its journal Journal of Business Ethics.

    Volume (Year): 120 (2014)
    Issue (Month): 2 (March)
    Pages: 201-217

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    Handle: RePEc:kap:jbuset:v:120:y:2014:i:2:p:201-217
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    1. Vincent (Vincent Peter) Hogan & Ian Walker, 2006. "Education choice under uncertainty : implications for public policy," Working Papers 200615, School of Economics, University College Dublin.
    2. Bodvarsson, Orn B. & Walker, Rosemary L., 2004. "Do parental cash transfers weaken performance in college?," Economics of Education Review, Elsevier, vol. 23(5), pages 483-495, October.
    3. Johnson, Richard W & Neumark, David, 1996. "Wage Declines among Older Men," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 740-48, November.
    4. DEL REY, Elena & RACIONERO, Maria, . "Financing schemes for higher education," CORE Discussion Papers RP 2181, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    8. Gary D. Hansen & Ayse Imrohoroglu, 1990. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," UCLA Economics Working Papers 583, UCLA Department of Economics.
    9. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    10. Ngo Van Long & Koji Shimomura, 1997. "Education, Moral Hazard, and Endogenous Growth," Discussion Paper Series 80, Research Institute for Economics & Business Administration, Kobe University, revised Jan 1998.
    11. Leigh, Andrew & Ryan, Chris, 2008. "Estimating returns to education using different natural experiment techniques," Economics of Education Review, Elsevier, vol. 27(2), pages 149-160, April.
    12. Neumark, David & Taubman, Paul, 1995. "Why Do Wage Profiles Slope Upward? Tests of the General Human Capital Model," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 736-61, October.
    13. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
    14. Robert J. Willis & Sherwin Rosen, 1978. "Education and Self-Selection," NBER Working Papers 0249, National Bureau of Economic Research, Inc.
    15. Miller, Paul & Mulvey, Charles & Martin, Nick, 2006. "The return to schooling: Estimates from a sample of young Australian twins," Labour Economics, Elsevier, vol. 13(5), pages 571-587, October.
    16. Vogel, Jonathan, 2007. "Institutions and moral hazard in open economies," Journal of International Economics, Elsevier, vol. 71(2), pages 495-514, April.
    17. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    18. Pauly, Mark V, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 44-62, February.
    19. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2005. "Evaluating the effect of education on earnings: models, methods and results from the National Child Development Survey," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(3), pages 473-512.
    20. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
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