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Macroeconomic Instability, Migration, and the Option Value of Education

  • Eliakim Katz

    (Department of Economics, Northern Illinois University)

  • Hillel Rapoport

    ()

    (Bar Ilan University,and CREDPR,Department of Economics,Stanford University)

We explore the relation between variability in the rate of return to human capital and investment in education in the context of migration. Specifically, we show that if migration is a possibility, such variability in the rate of return to human capital can induce residents of developing countries to make greater investments in education. Moreover, providing that education is relatively costly, variability in the return to human capital may increase the average level of education in a developing economy even after expected migration is netted out. Finally, our findings are shown to have explanatory power in relation to education and migratory patterns of minorities.

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File URL: http://www.biu.ac.il/soc/ec/wp/17-01/17-01.pdf
File Function: Working paper
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Paper provided by Bar-Ilan University, Department of Economics in its series Working Papers with number 2001-17.

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Date of creation: Oct 2001
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Handle: RePEc:biu:wpaper:2001-17
Contact details of provider: Postal: Faculty of Social Sciences, Bar Ilan University 52900 Ramat-Gan
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Web page: http://www.biu.ac.il/soc/ec
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  16. M. C. Burda, 1995. "Migration and the Option Value of Waiting," SFB 373 Discussion Papers 1995,58, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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