Question

1. Assume that the human capital model is true – education leads to increased earnings because it improves the skills of the students who get education.

a. Write one empirical observation that we would expect to be true based on the human capital model. Only refer to variables you can actually measure (so for example you can’t observe “skill,” but you could observe “a math test score”). Ideally, pick an empirical prediction that we didn’t talk about in class.

b. Now, assume that you do see that empirical observation. Explain it in some other way besides human capital.

Answer 1

a) we all know and its being emperically proven also that human capital increases efficiency and leads to increase earnings. here we are taking example of an engineer. suppose there are two engineers A & B. A went to a better college to study and do his masters and B is a person who doesnot go to a better college and does only graduation with low grades. after two years both are engineers but there performances are not same at all. A builds machines which are very efficient and lasts longer and is known for his good work but B being a ordinary student makes average quality product which are not very efficient so he is not known for his good work. so here we can conclude that those who went to attend good colleges and got good scores in there tests are better engineers than those who didnot go to college and are poor scored. so we can say human capital model is true and those who are skilled get good job and earn better than others.

b) looking at the same example we can also conclude that the engineers who are producing good product are the result of accessability to good equipments and better work place and if other engineers could get the same facilities they can also make better products so there is no difference in human capital its jut the better facilities that makes the difference.