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Investment in U.S. Education and Training

  • Jacob Mincer
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    The current high rates of return to human capital stimulate a supply response via increased investments in education and training. The so increased human capital stock exerts downward pressures on the rates of return that reduce the skill differential in wages. This paper reports estimates of: the responses of investments in post-secondary education, measured by enrollments, to changes in the rate of return; responses of investment in job training, measured by incidence; and effects of accumulated human capital stocks, measured by educational attainment, on educational wage differentials. Enrollment responses and attainment effects are shown to be separated by a time lag of about a decade. The parameter estimates are based on annual CPS and NCES data, covering a recent 25 year period. If demands for human capital cease their acceleration, the rate of return is expected to decline about 25% over the current decade, judging by the estimated parameters and lags.

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    File URL: http://www.nber.org/papers/w4844.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4844.

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    Date of creation: Aug 1994
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    Publication status: published as Research in Labor Economics, Vol. 17 (1998).
    Handle: RePEc:nbr:nberwo:4844
    Note: LS
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    1. Freeman, Richard B., 1987. "Demand for education," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 6, pages 357-386 Elsevier.
    2. Allen, Steven G, 2001. "Technology and the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 440-83, April.
    3. Jacob Mincer & Boyan Jovanovic, 1979. "Labor Mobility and Wages," NBER Working Papers 0357, National Bureau of Economic Research, Inc.
    4. Harvey S. Rosen, 1981. "Taxation and On-the-job Training Decisions," NBER Working Papers 0733, National Bureau of Economic Research, Inc.
    5. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November.
    6. Clotfelter, Charles T. & Ehrenberg, Ronald G. & Getz, Malcolm & Siegfried, John J., 1992. "Economic Challenges in Higher Education," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110509.
    7. Joanne Salop & Steve Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
    8. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February.
    9. Richard B. Freeman, 1979. "The Effect of Demographic Factors on Age-Earnings Profiles," NBER Working Papers 0316, National Bureau of Economic Research, Inc.
    10. Mattila, J. Peter, 1982. "Determinants of Male School Enrollments, A Time-Series Analysis," Staff General Research Papers 10849, Iowa State University, Department of Economics.
    11. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1989. "Job Matching and On-the-Job Training," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 1-19, January.
    12. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
    13. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
    14. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
    15. Finis Welch, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," UCLA Economics Working Papers 146, UCLA Department of Economics.
    16. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
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