Charlot, Olivier and Decreuse, Bruno (2006): Over-education for the rich, under-education for the poor: a search-theoretic microfoundation.
Download (328Kb) | Preview
This paper studies the efficiency of educational choices in a two sector/two schooling level matching model of the labour market where a continuum of heterogenous workers allocates itself between sectors depending on their decision to invest in education. Individuals differ in ability and schooling cost, the search market is segmented by education, and there is free entry of new firms in each sector. Self-selection in education originates composition effects in the distribution of skills across sectors. This in turn modifies the intensity of job creation, implying the private and social returns to schooling always differ. Provided that ability and schooling cost are not too positively correlated, agents with large schooling costs — the ‘poor’ — select themselves too much, while there is too little self-selection among the low schooling cost individuals — the ‘rich’. We also show that education should be more taxed than subsidized when the Hosios condition holds.
|Item Type:||MPRA Paper|
|Original Title:||Over-education for the rich, under-education for the poor: a search-theoretic microfoundation|
|Keywords:||Ability; Schooling cost; Heterogeneity; Matching frictions; Efficiency|
|Subjects:||J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J60 - General
I - Health, Education, and Welfare > I2 - Education and Research Insititutions > I20 - General
|Depositing User:||Bruno Decreuse|
|Date Deposited:||19. Jun 2007|
|Last Modified:||11. Feb 2013 21:23|
Abowd, J., Kramarz, F., Margolis, R., 1999. High wage workers and high wage firms. Econometrica 67, 251-333 Acemoglu, D.T., 1996. A microfoundation for social increasing returns to human capital accumulation. Quarterly Journal of Economics 61, 779-804 Arrow, K., 1973. Higher education as a filter. Journal of Public Economics 2, 193-216 Burdett, K., Smith, E., 2002. The low skill trap. European Economic Review 46, 1439-1451 Cameron, S., Heckman, J.J., 2001. The dynamics of educational attainment for black, hispanic and white males. Journal of Political Economy 109, 455-499 Carneiro, P., Heckman, J.J., 2001. The evidence on credit constraints in postsecondary schooling. Economic Journal 112, 705-734 Charlot, O., Decreuse, B., 2005. Self-selection in education with matching frictions. Labour Economics 12, 251-267 Charlot, O., Decreuse, B., Granier, P., 2005. Adaptability, productivity, and the returns to schooling in a matching model. European Economic Review 49, 1007-1032 Fershtman, C., Murphy, K.M., Weiss, Y., 1996. Social status, education and growth. Journal of Political Economy 104, 108-132 Fernandez, R., 2001. Sorting, education and inequality. In Advances in economic theory, Dewatripont, M., Hansen, G., Turnovsky, S., eds, Cambridge University Press Heckman, J.J., 2000. Policies to foster human capital. Research in Economics 54, 3-56 Hosios, A., 1990. On the efficiency of matching and related models of search and unemployment. Review of Economic Studies 57, 279-298 Inderst, R., 2005. Competitive search markets with heterogeneous workers. European Economic Review 49, 1525-1542 Laing, D., Palivos, T., Wang, P., 1995. Learning, matching and growth. Review of Economic Studies 62, 115-129 30 Lang, K., Manove, M., 2003. Wage annoucements with a continuum of worker types. Annales d’Economie et de Statistique 71-72, 223 - 244 Moen, E.R., 1999. Education, ranking, and competition for jobs. Journal of Labor Economics 17, 694-723 Moscarini, G., 2001. Excess worker reallocation. Review of Economic Studies 68, 593-612 Pissarides, C., 2000. Equilibrium unemployment theory. MIT Press Roy, A., 1951. Some thoughts on the distribution of earnings. Oxford Economic Papers 3, 135-146 Saint-Paul, G., 1996. Dual labor market: a macroeconomic perspective. MIT Press Snower, D., 1995. The low-skill, bad-job trap. In Acquiring skills: market failures, their symptoms and policy responses. A. Booth and D. Snower, eds. Cambridge, MA, Cambridge University Press Spence, M., 1973. Job market signalling. Quarterly Journal of Economics 87, 355-374