2. Evaluate the following statements and explain whether they are true, false or uncertain:(a) According to...

2. Evaluate the following statements and explain whether they are true, false or uncertain:(a) According to the Ben-Porath model discussed in class, it is not optimal to work for several years after graduation and reenter school at older ages.(b) According to the Ben-Porath model discussed in class, the marginal cost is equal to marginal benefit of human capital investment when t > t∗.(c) According to the Ben-Porath model discussed in class, the marginal benefit of investing inhuman capital decreases over time because older people have lower ability to learn.

this is a labor market economics question

Solutions

Expert Solution

(a) According to the Ben-Porath model discussed in class, it is not optimal to work for several years after graduation and reenter school at older ages - FALSE

According to the model, human capital investments and non-trivial labpur supply decisions occur throughout the lifetime of an individual (continued investments), starting with higher investments in schooling. Following that, there is a period of full time work which is accompanied by investment in human capital (in the form of training programs, etc) and thus increasing earnings.

(b) According to the Ben-Porath model discussed in class, the marginal cost is equal to marginal benefit of human capital investment when t > t∗ - FALSE

(c) According to the Ben-Porath model discussed in class, the marginal benefit of investing in human capital decreases over time because older people have lower ability to learn - TRUE

Ben-Porath model is an innovation to take advantage of the finite life constraint which implies that investmnet gains decline as one gets older. They devised a model in which individual make investment decisions based on maximizing the present value of lifetime earnings.

Rahul Sunny answered 1 year ago

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