Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 18, Problem 5.2P
To determine
Identify the role of intergenerational income mobility in an economy.
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The economic model of Human Capital Investment assumes that individuals choose their path through post-secondary education based solely on which path will provide them with the highest lifetime income. In reality, individuals often choose a path through post-secondary education that does not maximize their lifetime income, as a result of various factors.
Consider Alex, an individual whose path through post-secondary education did not maximize their lifetime income. For each of the following potential reasons, construct a brief story that relates that reason to Alex's choice of post-secondary education.
a) Utility/disutility from education
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During the 1970s, the wages of high school graduates rose more than the wages of college graduates. During that same time, the fraction of high school graduates enrolling in college decreased substantially. Is this decrease in the college enrollment rate consistent with the human capital model of education? Explain (make sure to explain what the human capital model of education is as part of your answer.
The Economist article, Left in the Lurch, notes that throughout history many places that have experienced economic hardships have seen their residents leave. But, it notes that such "mobility" by workers from such places is _______ in the U.S. today. Part of this dynamic reflects policies that ______ population growth in more thriving communities (and thus make it more difficult for workers to relocate). Another part of this dynamic reflects public policies that often ______ the incentive to move. Choose the correct combination from the choices below. a. decreasing; enhance; increase b. increasing; restrict; reduce c. decreasing; restrict; reduce d. increasing; enhance; reduce
Chapter 18 Solutions
Principles of Economics (12th Edition)
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- This chapter discusses the importance of economic mobility. If the government increases its support of training programs, it could increase economic mobility from year to year Suppose the United States is considering reducing spending on current welfare programs to increase spending on p mobility. What are some of the advantages of doing so? Check all that apply. People will have greater incentive to work hard. Programs that enhance economic mobility are cheap. O Programs that enhance economic mobility are easier on those who do not make it. across generations within a generation economicarrow_forwardExplain why comparing educational attainment across immigrant generations and across countries of origin is complicated and can lead to misleading estimaes of intergenerational mobility?arrow_forwardhow Thomas Piketty relates the return on capital (r) to the rate of economic growth (g) in the context of inequalityarrow_forward
- 4.9 Going to Law School at the Age of 50. Although we might admire someone who decides to attend law school at the age of 50, explain using human capital theory why this is so rare.arrow_forwardWhich of the following provides the best explanation for how consumer credit can exacerbate inequality? People with lower wealth and incomes must sacrifice more capacity and capital in order to acquire credit. People with lower wealth and incomes purchase less, so since credit allows all people to make purchases sooner, credit provides less benefit to these people. People with lower wealth and incomes may have less access to credit and pay higher interest rates when they are approved. People with lower wealth and incomes are offered credit with less collateral.arrow_forwardWhich of the following are reasons why high income inequality may be inefficient? Check all that apply. 0 0 High inequality may lead to an overinvestment in higher education at the expense of primary education High inequality limits access to credit for a larger share of the population Redistribution through progressive tax systems creates work disincentives and limits investment. Savings rates for the very wealthy tend to be lower than in the middle class High inequality reflects differences in skills and effort by workersarrow_forward
- Identify a job you once held (or currently hold) andmake a list of all the ways that workers in this segmentof the labor market are being affected by the variousdimensions of economic restructuring: demographicchanges, globalization of the economy, and technological change. What does your list tell you abouthow social structure shapes people’s individual workexperiences?arrow_forwardExplain Human Capital Theory: who are the major contributors and what it is about?arrow_forwardWhy is income inequality in America so pronounced? Consider education Outsourcing, immigration, and the gains of the super-rich are the most common reasons for the income inequality in America. Tyler Cowen disagrees: The problem is largely the lack of education. To date, outsourcing is not yet common enough to have much effect. Immigration doesn't account for much of the change in the wages paid to unskilled workers since 1950. Advances in technology raises the incomes of highly skilled workers. Inequality will be reduced if more people undertake education. Source: The New York Times, May 17, 2007 Immigrants to the United States include unskilled workers from Mexico and skilled workers from countries such as India and China. How would each of these types of immigrants influence the personal distribution of income? Unskilled immigrant workers and skilled immigrant workers O A. increase the percentage of total income earned by the poorest 20 percent; decrease the percentage of total…arrow_forward
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