Key Ideas #5

Human Capital

I. The Economic Returns to Schooling—Theory

  • Equalizing differences in a homogeneous world
  • Optimal schooling with heterogeneous ability and opportunity
  • HK production vs screening and sorting

II. Returns-to-Schooling ‘Metrics

  • The causal effect of schooling on wages
  • OVB
  • Theoretical predictions for the sign of OVB (“ability bias”)
  • Econometric solutions to the OVB problem
  • Estimates of the returns to schooling
  • Discount rate bias
  • Evidence on the screening hypothesis

III. Returns to Experience

  • Specific and general human capital
  • Who pays for your human capital?
  • Theoretical origins of the Mincer earnings function
  • Estimates of the returns to experience