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Nobel Prize winner: Becker Part 4 (Becker's model: Human capital (Yet,…
Nobel Prize winner: Becker Part 4
Becker's model: Human capital
Education to enhance wages
Policy implications:
Is there under- or overprovision of education?
Should the state subsidize education?
Theory of human capital (Becker, 1975):
--> Formal schooling (general) vs on-the-job training (specific)
Becker's model: Human capital
Yet, in the early 1960s, this was totally ignored.
Friedman and Kuznets (1945) implicit theory of human capital, and mostly empirical emphasis.
Discussion of the notion that human skills can be created.
Becker: comprehensive theoretical framework on human capital – abductive approach (data-driven model building)
Todays Impact
2. Family/fertility
Investing in education for girls is THE main programs in developing countries.
Specific case: ChinaEven now China relaxed the one-child policy, its fertility will not rise much given the huge economic development in China
3. Crime
Are criminals really rational? Serial murders are almost by definition irrational (unless they have a very high discount rate)
1. Discrimination
Perfect competition is very unrealistic in today’s market, so discrimination seems to be a fact of life (although governments will try to reduce it as much as possible)
4. Human capital
Opportunity cost of investing in schooling still very relevant in everyday life choices!
Conclusion
Pioneering microeconomic analysis in time where large-scale data were beginning to be collected.
Important contributions to economic science by extending the economic approach to a wide range of social questions.
Rather than studying overall treatment effects, Becker was interested in the mechanisms at work.