Human capital theory 清华大学王一江Word文档格式.docx

1、 pay- age of worker ments Bii. Determining the optimal level of investment Present value = B1/（1+r） + B2/（1+r）2 + BT/（1+r）T This present value is compared with the current marginal cost to determine if an additional unit of expenditure is worthwhile. Internal rate of return method. Use the same form

2、ula as above. Ask the question “how large could the discount rate be and still render the investment profitable?” Example of valuing human assets: E&S, p.315.iii. Implications of the theory Those who dislike schools will invest less in HC. Those who have fewer opportunities will invest less. MC MC M

3、B Younger people are more likely to attend college. Present-oriented people are less likely to go to college than forward-looking people （e.g., there are people for them current income is more important）. College attendance will decrease if the costs of college rise. College attendance will decrease

4、 if income difference between college and HS graduates narrows. Those who bear the primary responsibilities for child bearing and raising （historically women） are less likely to seek as much education. But, as the number of children decreases, women will seek more education.General vs. Firm-Specific

5、 Human Capital1. Introduction.i. Definitions G vs. SHC Conceptual definitions （general HC, firm SHC, and Industry SHC.） Are they practically separable?ii. Implications Firms are not willing to invest in workers GHC. Labor turnover is adversely affected by investment in SHC. Mincer & Jovanovic （1981）

6、 report data that the annual separation rate drops by 90% from the first year to the 6th year with the firm. GHC has no effect on labor turnover. 2. SHC investment and matching/turnover （Parsons. 1986, in the spirit of Mortensen 1978; Hashimoto and Yu, 1979; and Harshimoto, 1981.）i. Assumptions The

7、worker and the firm must undertake an investment （in SHC, or “organizational capital”） if the worker is to be an efficient employee. Investment cost is c. After the investment, the workers productivity in the firm and that in the labor market are subject to random shocks. The former may be due to a

8、reversal of demand for the firms product. The latter may be due to some structure in the economy. （Comment: two shocks are not necessary. It is the relative values of the workers productivity in and outside of the firm that matters.） The workers realized productivity is thusVi = i + i, i = 0, 1 （w/

9、investment）Vi = 0, （w/o investment）0: workers expected productivity at the firm. 1: workers expected productivity at another employment0: A random variable, shock to productivity at the employment1: A random variable, shock to productivity at other employmentE（） = 0 The firm maximizes profit and the

10、 worker income. ii. Results. 0 1 has to be greater than the cost to make investment in the worker profitable on average, 0 1 c. Efficient separation occurs when V0 V1 0 + 0 1 + 1, or m = o - 1 1 - 0 1 m 0 （-m, 0） （0, 0） Separation is less if 1 & 0 are positively correlated. There is no separation if

11、 they are perfectly and positively correlated. If 1 & 0 are independent, increased variance in either of them will increase the probability of separation. Since separation is efficient, distinction between layoffs & quits is not necessary and meaningful.iii. Information requirement in sharing the ga

12、in Defining factor payments w = V1 + （V0 V1）= V1 + m + （0 1） and = V0 w= （1 - ）（V0 V1）= （1 ）m + （1 ）（0 1）where 0 c, but m c, and （1 ）m b1. The opportunity cost of the workers labor is r b1, meaning that even with a bad draw, the worker prefers to stay if he can be paid a wage consistent with b1. The

13、 worker has to receive at least utility level v. The firm produces nothing if the worker is let go. The worker can make an investment to increase the probability of b2 from f（0） to f（1）. f（0） 0 （1） Productivity is learned before the work is actually done, so that in principle the decision to work or

14、 not can be made contingent on the draw. Both firm and worker are risk-neutral. ii. The case of perfect informationUnder perfect information, the two sides will sign an efficient contract with the following contents. The worker will undertake the investment. He will work for the firm no matter what

15、the draw of productivity may be. He is compensated y = v + i （= r + i?）iii. When the firm has private information regarding the workers productivity. Normally, this will result in some distortion. However, in this particular case, it doesnt alter the full information contract because the workers out

16、side productivity is never as high. As long as i can be contracted and the investment is made, the same fixed wage should be offered and the worker always retained. iv. When investment is private information This is a straightforward moral hazard problem. The contract ties compensation to output. Bu

17、t the worker is still always retained. Let y2 and y1 represent the pay offered in the two realizations, with y2 y1. The incentive compatibility condition for undertaking the investment is f（1）y2 + 1 f（1）y1 i （2） f（0）y2 + 1 f（0）y1. （IC） For the worker to accept the contract, it is necessary thatf（1）y

18、2 + 1 f（1）y1 i v. （IR） （3） Together, y2 and y1 are found when the two conditions are treated as equalities will determine levels of y2 and y1 that will maximize the firms profits. Note that y2 v + i v y1 （4） It remains to be determined that the contract entails a higher profit than if it doesnt indu

19、ce the worker to invest. This requires thatf（1）（b2 - y2） + 1 f（1）（b1 - y1） i f（0）b2 + 1 f（0）b1 - v. （5） （5） can be reduced to （1）. This means that, provided the investment is socially productive and agents are risk neutral, moral hazard problem alone creates no inefficiency. The reason for this is t

20、hat, as long as the investment is made, gain or loss by either party is only a transfer between the two parties, not a net social loss. （2） guarantees that the investment will be made. v. Two-sided informational problem and up-or-out contract.The problem: The worker has private information regarding investment. The firm has private information regarding the productivity draw, i.e., whether its b1 or b2. Because i is private information, the worker will not invest if he is paid a fixed wage & guaranteed employment （as under