1. Investments in Human Capital: Education and Training
Chapter 9
Investments in Human Capital: Education and Training

2. Human Capital Investment Education and Training
Human Capital Investments: The Basic Model I
Human Capital Investment
Education and Training
Job Search and Migration
Costs of Human Capital investment
Direct Expenses
Forgone Earnings
Psychic Costs

3. Present Value Method - Investment should take place if :
The Investment Decision I
Present Value Method - Investment should take place if :
Present Value of Benefits > Costs of Investment, or, Net Present Value > 0
Internal Rate of Return Method - Investment should take place if:
When PV is set equal to costs, the rate of return, r, exceeds that of other investments

4. Figure 9.1: The Optimum Acquisition of Human Capital

5. Consumption vs. Investment Benefits of College
The Demand for College Education I
Consumption vs. Investment Benefits of College
Alternative Earning Streams - H.S. vs. UTEP
Gross and Net Benefits of College

6. Figure 9.2: Alternative Earnings Streams

7. Factors That Influence Investment Decision
The Demand for College Education I
Factors That Influence Investment Decision
Discount Rate - Present vs. Future
Stream of Benefits and Age
Costs (Including Psychic Costs)
Earnings Differentials and Education Level

8. Table 9.1: Changes in College Enrollments and the College/High School Earnings Differential, by Gender,

9. Average Earning and Education
Education and Age/Earning Profiles I
Average Earning and Education
Concavity of Age Earning Profiles and On-The-Job Training
“Fanning Out” of Earnings Differentials and On-The-Job Training

10. Figure 9.3: Money Earnings (Mean) for Full-Time, Year-Round Male Workers, 2005

11. Age/Earning Profiles - Comparing Men and Women
Women and the Acquisition of Human Capital I
Age/Earning Profiles - Comparing Men and Women
Concavity of Women’s Age Earning Profiles and On-The-Job Training
1. Traditional Roles of Women
2. Interrupted Careers
Changes in the Acquisition of Higher Education by Women

12. Figure 9.4: Money Earnings (Mean) for Full-Time, Year-Round Female Workers, 2005

13. Table 9.2: Labor Force Participation Rates, Part-Time Employment Status, and Hours of Work in the United States, by Gender (2005)

14. Figure 9.6: The Increased Concavity of Women’s Age/Earnings Profiles

15. Table 9.3: Percentages of Women among College and University Graduates, by Degree and Field of Study, 1971 and 2004

16. Rates of Returns and Bias
Is Education a Good investment for Individuals? I
Rates of Returns and Bias
1. Upward Bias - Separating the Impacts of Education and Ability
2. Downward Bias - The Exclusion of Employee Benefits and Non Monetary Benefits

17. Table 9.4: International Comparisons of Schooling, 2002-2003

18. Figure 9.7: The Benefits to Workers of Educational Signaling

19. Figure 9.8: The Lifetime Benefits and Costs of Educational Signaling

20. Figure 9.9: Requiring a Greater Signal May Have Costs without Benefits

21. Figure 9.5: Investments in On-the-Job Training over the Life Cycle