The document discusses human capital investment and returns to education. It makes three key points:
1) Investing in education can be treated as an investment in human capital that yields returns in the form of higher lifetime earnings, similar to physical capital investments. The costs and benefits of this investment can be analyzed using tools like net present value calculations.
2) Factors like ability, discrimination, access to funding affect how much education people obtain and contribute to earnings inequality. Those with more ability or facing less discrimination obtain more education and earn more.
3) Imperfect capital markets may underallocate funding to human capital investments relative to physical capital, as lenders view human capital as less secure. Government interventions could help
The cost of production/Chapter 7(pindyck)RAHUL SINHA
content
•MEASURING COST: WHICH COSTS MATTER?
•Fixed and variable cost
•Fixed versus sunk cost
•Amortizing Sunk Costs
•Marginal cost
•Average cost
•Determinants of short run cost
•Diminishing marginal returns
•The shapes of cost curves
•The Average–Marginal Relationship
•Costs in a long run
•Cost minimizing input choices
•Isocost lines
•Marginal rate of technical substitution
•Expansion path
•The Inflexibility of Short-Run Production
•Long run average cost
•Economies and Diseconomies of Scale
•The Relationship Between Short-Run and Long-Run Cost
•Break even analysis
Economist Mary C. Daly, Associate Research Director at the Federal Reserve Bank of San Francisco, and Research Associate Yifan Cao explore whether a college degree still translates to higher earnings, and if those extra earnings are enough to make investing in higher education worthwhile. In this essay, find out if you really need a college degree to climb the economic ladder.
The cost of production/Chapter 7(pindyck)RAHUL SINHA
content
•MEASURING COST: WHICH COSTS MATTER?
•Fixed and variable cost
•Fixed versus sunk cost
•Amortizing Sunk Costs
•Marginal cost
•Average cost
•Determinants of short run cost
•Diminishing marginal returns
•The shapes of cost curves
•The Average–Marginal Relationship
•Costs in a long run
•Cost minimizing input choices
•Isocost lines
•Marginal rate of technical substitution
•Expansion path
•The Inflexibility of Short-Run Production
•Long run average cost
•Economies and Diseconomies of Scale
•The Relationship Between Short-Run and Long-Run Cost
•Break even analysis
Economist Mary C. Daly, Associate Research Director at the Federal Reserve Bank of San Francisco, and Research Associate Yifan Cao explore whether a college degree still translates to higher earnings, and if those extra earnings are enough to make investing in higher education worthwhile. In this essay, find out if you really need a college degree to climb the economic ladder.
The 2009 edition of Education at a Glance: OECD Indicators enables countries to see themselves in the light of other countries’ performance. It provides a rich, comparable and up-to-date array of indicators on the performance of education systems and represents the consensus of professional thinking on how to measure the current state of education internationally.
The indicators look at who participates in education, what is spent on it, how education systems operate and the results achieved. The latter includes indicators on a wide range of outcomes, from comparisons of students’ performance in key subject areas to the impact of education on earnings and on adults’ chances of employment. For more info, see www.oecd.org/edu/eag2009
7 May 2020 - This PPT presents the results of the third OECD PISA assessment of the financial literacy of 15-year-old students. Find out more at http://www.oecd.org/finance/launch-pisa-financial-literacy-results-2018.htm
College Can Be Expensive - How Do You Pick the Right One?PayScale, Inc.
These days, college students have more to worry about than what classes to take next semester. Rising tuition expenses, mountains of debt, and the not-so-sunny outlook on the employment prospects of many popular career choices have increased the importance for both parents and future college students to examine their choices more thoroughly than ever before. Before mailing in the applications, use the available data wisely: research which majors have the most potential, and, more importantly, study each school’s return on investment—which is what, ultimately, you’ll earn back from your degree.
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
The Indian economy is classified into different sectors to simplify the analysis and understanding of economic activities. For Class 10, it's essential to grasp the sectors of the Indian economy, understand their characteristics, and recognize their importance. This guide will provide detailed notes on the Sectors of the Indian Economy Class 10, using specific long-tail keywords to enhance comprehension.
For more information, visit-www.vavaclasses.com
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Ethnobotany and Ethnopharmacology:
Ethnobotany in herbal drug evaluation,
Impact of Ethnobotany in traditional medicine,
New development in herbals,
Bio-prospecting tools for drug discovery,
Role of Ethnopharmacology in drug evaluation,
Reverse Pharmacology.
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
3. 4-3
Investment in Human
Capital
o Expenditures on education and training can be
treated as an investment in human capital just
like investments in physical capital.
• Human capital yields a rate of return (higher
earnings) like physical capital.
o Educational attainment has been rising in the
U.S.
• In 1970, 36% of the labor force was a high school
dropout. In 2008, it was 12%.
6. 4-6
Human Capital Model
o The decision should be made by comparing
the costs and benefits (higher earnings) of
college.
o Costs of attending college
• The direct costs are the cost of tuition, fees, and
books.
∞Room and board are not included since they are
needed regardless of whether you go to college.
• The indirect cost is the forgone earnings you
give up while you attending college.
7. 4-7
Age-Earnings With and
Without College
Age
Annual Earnings
6518
• The HH curve is the age-
earnings profile if a person does
not attend college.
• The CC curve is the cost-
earnings profile if one attends
college.
• The total cost of attending
college is the sum of the direct
costs (area 1) plus indirect
costs (area 2).
• The benefit of attending
college is the increase in
earnings due to the college
degree (area 3).
• Whether it is rational to attend
college depends on whether the
present value of the benefits
exceeds the present value of
the costs.
22
Incremental
Earnings (3)
H
H
C
C
Indirect
Costs (2)
Direct Costs (1)
8. 4-8
Vp
= Ex:
where i = 10%
Vp = Def:
Present Value
o Discounting converts the value
of future dollars into today’s
dollars through the interest rate.
The present value (Vp) of a payment
received one year from now is:
Payment 1 year from now
1+Interest rate
$ 100.00
$ 110
1.10 =
9. 4-9
Present Value
Vp
= E0 +
E1
(1 + i)
+
En
(1 + i)n
E2
(1 + i)2
+ +. . . . .
Costs are represented as negative
values of E.
A person should attend college if
the net present value (Vp) is greater
than 0.
The present value of a future
stream of incremental earnings or
costs (E) :
10. 4-10
Present Value
of Earnings
(4)
Discounted Value
(10 Percent Rate)
(3)
Incremental
Earnings
(2)
Year
(1)
PV of $8,000 Investment in Webmaster Training Program
(Interest Rate = 10 Percent)
Discounted Present Value
0 -$ 8,000 1.000 $ -8,000
1
2
3
$ 3,000
$ 4,000
$ 5,000
0.909
0.826
0.751
$ 2,727
$ 3,305
$ 3,755
$ 1,787
• Suppose Melinda is considering taking a webmaster training
program that involves direct costs of $3,000 and forgone earnings
$5,000. The training program will increase Melinda’s earnings by
$3,000, $4,000, and $5,000 for the 3 years she plans on working.
• Because she can borrow the funds at an interest rate of 10%, we
will discount the future expected income at an 10% rate.
• What is the present value (PV) of this training program?
• The PV of the training program is positive, Melinda should take the
training program.
11. 4-11
Internal Rate of Return
Vp
= 0 = E0
+
E1
(1 + r)
+
En
(1 + r)n
E2
(1 + r)2
+ +. . . . .
A person should attend college if
the rate of return (r) exceeds the
market interest rate (i).
The internal rate of return, r, is the
rate of return at which Vp = 0:
12. 4-12
Generalizations
o Length of income stream
• The longer the stream of positive incremental
earnings, the more likely the net present value
will be positive.
∞As a result, younger people are more likely to attend
college
o Costs of attending college
• The lower the cost of attending college, the
more likely the net present value is positive.
∞Older people have a higher opportunity cost of
attending college, less likely to attend.
13. 4-13
Generalizations
o Earnings differential
• The larger the college-high school earnings
differential is, the more likely the net present
value is greater.
∞College attendance rose in the 1980s as the
college-high school premium increased.
14. 4-14
Rate of Return by Country
14.3
11.0
9.4
8.4 8.0
5.1 4.4
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
U
nited
K
ingdomU
nited
States
C
anada
FranceG
erm
any
Sw
eden
D
enm
ark
RateofReturn(%)
• The rate of
return per year
of college
education varies
substantially
across countries
for males.
15. 4-15
College-High School Wage
Premium
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1973 1978 1983 1988 1993 1998 2003 2008
Ratio
Male Female
• The college-
high school wage
premium fell in
the 1970s for
both men and
women.
• The premium
fell because of
an increase in
supply of college
graduates due to
the baby boom.
• The premium
rose after 1979,
due to increases
in the demand for
college-trained
workers because
of technology
improvements.
16. 4-16
Caveats
o We can’t predict the college-high school
wage premium for future graduates.
• The charts report past differentials.
• The future differential may be smaller as the
high differential may increase future supply.
o These are average earnings of college and
high school graduates; the distribution of
earnings around the mean is wide.
o The quality of schooling matters as well as
the quantity of schooling.
17. 4-17
Private vs. Social
Perspective
o Education yields substantial external or
social benefits that society reaps.
• More educated workers have lower
unemployment rates.
• Education raises the amount and quality of
participation in the political process.
• Children grow up in a better home environment
if the parents are more educated.
• The research discoveries of more educated
persons yield benefits to society.
18. 4-18
Private vs. Social
Perspective
o The social rate of return is higher (lower)
than the private rate of return, resources will
be underallocated (overallocated) to human
capital investments.
• The private and social rate of return are quite
similar.
19. 4-19
1. Suppose the net present value of an educational
investment is highly positive. What can you infer
about the investment’s internal rate of return
relative to interest cost of borrowing?
Questions for Thought
2. Comment on the following statements:
(a) Older workers are less geographically mobile than
younger workers.
(b) An economic recession tends to stimulate college
enrollments.
(c) The age-earnings profiles shown earlier, clearly
indicate that people with more education earn more
than people with less education; therefore, personal
spending on education is always a good investment.
21. 4-21
Diminishing Rate
of Return
Years of Schooling
RateofReturn
• The marginal rate of return to
education declines as additional
schooling is acquired.
• Investment in education is
subject to the law of
diminishing returns. The
increases in knowledge
decline with each additional
year of schooling.
• The return also falls because
the explicit cost and
opportunity cost of education
rises with additional schooling.
r
22. 4-22
Demand for Human Capital
Years of
Schooling
r,i
• Since individuals should
increase schooling so that the
marginal rate of return of
schooling (r) is equal to the
interest rate (i).
• Using the r = i rule, at
interest rate i2, the optimal
level of schooling is e2.
• At i3 the optimal level is e3.
r
S2
e2
i2
• Each equilibrium point (1,2,3)
indicates the “price” and
quantity demanded of human
capital. In other words, the
demand for human capital.
• At i1 the optimal level is e1.
S1
S3
i1
i3
1
2
3
, DHC
e1 e3
23. 4-23
Ability Differences
Years of
Schooling
r,i
• Alfonse is low-ability person.
He has low mental/physical
talents and/or low motivation
and self-discipline. His demand
for schooling is DA.
• Bob is a high-ability person.
He has a greater demand for
schooling at DB because he
can better translate schooling
into higher productivity and
earnings.
• For a given interest rate, Bob
will obtain more schooling
which will compound the
earnings differential between
low and high ability persons.
Si
A
DA
eA
DB
B
eB
24. 4-24
Discrimination
Years of
Schooling
r,i
• Albert is black and is
discriminated against in the
labor market. His demand for
schooling is DA since he has
low ability to convert additional
schooling into higher earnings.
• Brett is white and has a
greater demand for schooling
at DB as he can reap the
benefits of additional
schooling.
• For a given interest rate, Bob
will obtain more schooling
which will compound the
earnings differential between
whites and blacks.
Si
A
DA
eA
DB
B
eB
25. 4-25
Cost of Funds
Years of
Schooling
r,i
• Ann is from a wealthy family
and faces a low cost of
borrowing funds (iA). Her
optimal level of schooling is eA.
SA
eA
iA
• Betty is from a poor family
and faces a high cost of
borrowing funds (iB). Her
optimal level of schooling is eB.
SB
iB
B
A
DA=DB
eB
26. 4-26
Interactions
o The ability, discrimination, and cost of
funds factors that affect schooling levels
may interact to cause even larger earnings
inequality.
• If a person faces labor market discrimination,
lenders may charge a higher interest rate
since they are less certain of getting repaid.
∞Discrimination will reduce both the supply and
demand for schooling.
∞Anti-discrimination policies may reduce earnings
inequality as a result.
27. 4-27
Capital Market Imperfections
o The capital market is biased in favor of
physical rather than human capital.
• Lenders can’t repossess human capital.
• Young people, who are most likely to invest in
human capital, don’t have established credit
ratings.
o The government may have to intervene by
subsidizing human capital loans in order to
make the returns on physical and human
capital equal.
28. 4-28
1. Describe the expected effects that college
scholarships based on (a) student ability and (b)
student need are likely to have on the distribution
of earnings.
Question for Thought
30. 4-30
Costs and Benefits
o Firms will invest in on-the-job training if the
present value of the benefits of the training
exceeds the present value of the costs.
o The costs to the firm include:
• Direct costs such as classroom instruction and
greater worker supervision.
• Indirect costs such as reduced worker output
during training.
o The benefit is greater worker productivity.
31. 4-31
General and Specific
Training
o General training is training that is usable
at all firms and industries.
• Word processing skills or accounting skills
o Specific training is training that is usable
at only at the firm that provides the
training.
• Assembly procedure unique to a firm’s
product
o Most training is a mixture of general and
specific training.
32. 4-32
General Training
Wage&MarginalRevenueProduct
• Wu and MRPu are the wages
and marginal revenue product
for an untrained worker.
Marginal revenue product is the
increase in total revenue
associated with the
employment of an additional
worker.
• Since general training is
usable at other firms, workers
must pay for the entire cost of
the training. They receive a
lower wage (Wu> Wt) that is
equal to their diminished
productivity (MRPt).
• After the training period,
workers receive a higher wage
Wp that is equal to their new
higher level of productivity
MRPp.
Trainin
g
Post Training
Wu= MRPu
Wp= MRPp
Wt= MRPt
33. 4-33
Specific Training
Wage&MarginalRevenueProduct
• Since specific training is not
transferable to other firms, the
employer must pay for the
training.
• After training, the employer
gets a return on her training
investment by paying a wage
less than the worker’s
productivity (Wu < MRPt).
• The employer may pay a
higher wage to decrease
worker turnover and thus
protect her training investment
(Wp
’
).
Trainin
g
Post Training
Wu= MRPu
MRPp
MRPt
• During training, the employer
pays a wage greater than the
worker’s productivity (Wu>
MRPt).
Wp
’
34. 4-34
Modifications
o Faced with a minimum wage, some firms
may pay for general training.
• The firms recoup their expenses by paying
workers less than their MRP after the training is
completed.
∞This is possible because workers are not perfectly
mobile across jobs—there are costs to switching jobs.
o Workers with the most formal education also
receive more on-the-job training.
• They have shown they can receive training more
readily and thus less cost.
35. 4-35
1. Suppose that after graduation you take a job with
an employer that offers to pay full tuition for
employees wishing to return to school to get an
MBA degree during non-work hours. You are not
required to continue working for the firm after
getting your MBA. What type of training is this,
and who you think actually pays for it?
Question for Thought
37. 4-37
Investment or Consumption?
o Not all education expenditures are an
investment because some part is a
consumption expenditure.
• Courses such as music appreciation yield
consumption benefits rather than investment
benefits.
• By ignoring the consumption benefits of
education, researchers overstate the
investment costs of education and understate
the rate of return.
38. 4-38
Non-Wage Benefits
o Studies that only examine the earnings
of high school and college graduates
understate the rate of return for two
reasons.
1. College graduates have greater fringe
benefits as a percent of pay than high
school graduates.
2. College graduates tend to work in more
pleasant surroundings and have more
interesting jobs than high school graduates.
39. 4-39
Ability Problem
o Those with more ability (i.e., intelligence,
motivation, and self-discipline) are more
likely to go to college.
• Even without a college degree, they would have
earned more than those who decided not to go
to college.
• To the extent that the higher earnings of college
graduates reflects their greater ability rather than
schooling, the rate of return is overstated.
∞Omission of ability biases the rate of return estimates
by a small amount.
40. 4-40
Screening Hypothesis
o The screening hypothesis argues that
schooling increases earnings not by
increasing productivity but providing a way
to identify high-quality workers.
• Screening does not affect the private rate of
return, since college graduates still have
higher earnings.
∞The social rate of return is overstated, as screening
does not increase productivity.
• The empirical evidence shows screening
appears to play a small role.