chapter 6

Question 1

In describing the role of “fixed capital” in an economy, Adam
Smith (1776, Book II, Ch. 1) considered four categories.
The fourth type was what economists now refer to as WHAT

Answer 1

“human capital,”

Question 2

Smith described as consisting . . . of the acquired and useful abilities
of all the inhabitants or members of the society

Answer 2

HUMAN CAPITAL

Question 3

The acquisition of such
talents, by the maintenance of the acquirer during his education, study, or
apprenticeship, always costs a real expense, which is a capital fixed and
realized, as it were, in his person.

Answer 3

HUMAN CAPITAL

Question 4

WHAT is the knowledge, skills, education,
and experience possessed by an individual or
population, which can be used to create economic
value.

Answer 4

Human capital

Question 5

Economist describe higher education as a price signal or a
WHAT

Answer 5

screening device.

Question 6

WHAT MAKES UP HUMAN CAPITAL?

Answer 6

Education and training
Experience and Expertise
Health and Physical Wellness
Soft and Hard Skills

SHEE

Question 7

Formal education and training programs, can improve a person’s
knowledge and skills, making them more valuable in the labor market.
Education includes formal education, such as a college degree, as well
as informal learning. Training includes on-the-job training vocational
training, professional program, among others

Answer 7

EDUCATION AND EXPERIENCE

Question 8

People who have extensive experience in a particular
field or who have developed a high level of expertise in
a particular area may have valuable human capital.

Answer 8

EXPERIENCE AND EXPERTISE

Question 9

Good health and physical fitness can enable
people to work longer and more effectively,
which can increase their human capital.

Answer 9

health and physical fitness

Question 10

skills are specific, technical abilities that are typically learned
through education or training.

Answer 10

HARD

Question 11

personal
attributes and social skills that enable people to interact effectively with
others often necessary to perform tasks or functions

Answer 11

SOFT SKILLS

Question 12

help people to work effectively with others and adapt to changing
situations

Answer 12

SOFT SKILLS

Question 13

an economic theory that focuses on the
value of human knowledge, skills, and abilities as they relate to
economic growth and development.

Answer 13

HUMAN CAPITAL THEORY

Question 14

According to this theory,
investing in human capital, such as through education and
training programs, can lead to increased productivity,
innovation, and competitiveness

Answer 14

HUMAN CAPITAL THEORY

Question 15

This describes the relationship between an
individual’s earnings and their level of education and work experience. It
suggests that education and work experience lead to increased
productivity and earning potential, and that the returns to education and
work experience decline over time

Answer 15

Mincer earnings function.

Question 16

It suggests that the returns to education and
work experience are not uniform across all individuals, but rather depend
on the individual’s characteristics and circumstances

Answer 16

Becker-Chiswick model

Question 17

This theory suggests that education
serves as a signal to employers of an individual’s productivity and ability,
and that the returns to education are higher for individuals who are more
productive

Answer 17

Signaling theory of education.

Question 18

human capital theories

Answer 18

mincer earnings function
becker-chiswick model
signaling theory of education

Question 19

tool developed by the World Bank to assess how effectively
countries are utilizing the skills and abilities of their citizens to
contribute to economic development.

Answer 19

human capital index

Question 20

takes into account factors such as education, health, and
employment, and calculates the potential loss of economic
productivity due to these issues.

Answer 20

human capital index

Question 21

WHAT was first published in October 2018 and covers HOW MANY
countries, with a score ranging from ___, where _ represents
the maximum potential for human capital development.

Answer 21

The HCI was first published in October 2018 and covers 157
countries, with a score ranging from 0 to 1, where 1 represents
the maximum potential for human capital development.

Question 22

PILLARS OF HUMAN CAPITAL INDEX

Answer 22

SURVIVAL
EDUCATION
HEALTH

SHE

Question 23

Measures the probability of a child born today
surviving to age five

Answer 23

SURVUVAL

Question 24

Measures the amount of schooling that a child born
today can expect to receive, including the quality of the
education system

Answer 24

EDUCATION

Question 25

Measures the health outcomes of a child born today, including immunization rates, child malnutrition, and child mortality

Answer 25

HEALTH

Question 26

USES OF CAPITAL

Answer 26

BECKER VIEW GARDENER VIEW SCHULTZ/NELSON-PHELPS VIEW BOWLES-GINTIS VIEW SPENCE VIEW

Question 27

Human capital is directly useful in the production process. More explicitly, human capital increases a worker’s productivity in all tasks, though possibly differentially in different tasks, organizations, and situations.

Answer 27

BECKER VIEW

Question 28

According to this view, we should not think of human capital as unidimensional, since there are many dimensions or types of skills. A simple version of this approach would emphasize mental vs. physical abilities as different skills

Answer 28

GARDENER VIEW

Question 29

Human capital is viewed mostly as the capacity to adapt. According to this approach, human capital is especially useful in dealing with “disequilibrium” situations, or more generally, with situations in which there is a changing environment, and workers have to

Answer 29

SCHULTZ/NELSON-PHELPS VIEW

Question 30

Human capital is the capacity to work in organizations, obey orders, in short, adapt to life in a hierarchical/capitalist society

Answer 30

BOWLES GINTIS VIEW

Question 31

Observable measures of human capital are more a signal of ability than characteristics independently useful in the production process

Answer 31

SPENCE VIEW

Question 32

SOURCES OF HUMAN CAPITAL DIFFERENCES

Answer 32

1. Innate ability. Workers 2. Education/Schooling. 3. School quality and non-schooling investments. 4. Training. 5. Experience. 6. Pre-labor market influences. 7. Health. 8. Culture. 9. Economic and social policies. 10.Demographic factors

Question 33

Workers can have different amounts of skills/human capital because of innate differences.

Answer 33

innate ability

Question 34

Differences in education and training can lead to differences in knowledge and skills, which can affect an individual's ability to contribute to the economy.

Answer 34

education

Question 35

A pair of identical twins who grew up in the same environment until the age of 6, and then completed the same years of schooling may nevertheless have different amounts of human capital.

Answer 35

School quality and non-schooling investments

Question 36

. This is the component of human capital that workers acquire after schooling, often associated with some set of skills useful for a particular industry, or useful with a particular set of technologies.

Answer 36

Training

Question 37

. Work experience and on-the-job training can provide individuals with valuable skills and knowledge that can increase their value in the labor market

Answer 37

Experience

Question 38

There is increasing recognition among economists that peer group effects to which individuals are exposed before they join the labor market may also affect their human capital significantly.

Answer 38

Pre-labor market influences.

Question 39

. Poor health can limit an individual's ability to work and contribute to the economy, while good health can improve productivity

Answer 39

Health

Question 40

. Differences in cultural norms and values can affect an individual's ability to acquire knowledge and skills, as well as their willingness to invest in education and training.

Answer 40

Culture

Question 41

Government policies and practices, such as education funding and access to training programs, can affect an individual's ability to acquire human capital

Answer 41

Economic and social policies.

Question 42

Factors such as age, gender, and race can also affect an individual's ability to acquire human capital, due to historical and ongoing inequalities and discrimination

Answer 42

Demographic factors.

Question 43

STYLIZED FACT OR BLUFF Human capital is a key driver of economic growth. Countries with high levels of human capital tend to have higher levels of productivity and economic growth

Answer 43

FACT

Question 44

STYLIZED FACT OR BLUFF Human capital is correlated with income. Individuals with higher levels of human capital tend to have higher income levels. Education is strongly correlated with labor force participation rates, unemployment rates, and earnings

Answer 44

FACT

Question 45

FACT OR BLUFF Investment in human capital has low returns. Investing in education and training can lead to decreased productivity and lower income levels, resulting in lower returns on investment

Answer 45

bluff

Question 46

fact or bluff

Answer 46

Human capital is cumulative. Knowledge and skills acquired through education and training can build on each other, leading to greater levels of human capital over time

Question 47

fact or bluff Human capital is not transferable. Knowledge and skills are not acquired through education and training can be used in different industries and occupations, leading to decresed mobility in the labor market

Answer 47

bluff

Question 48

fact or bluff Human capital is mobile. Individuals with high levels of human capital can often move to different countries or regions in search of better job opportunities and higher income levels.

Answer 48

fact

Question 49

fact or bluff Human capital is equal. There are often significant differences in human capital levels among individuals and populations, due to factors such as education, health, and cultural differences

Answer 49

bluff Human capital is unequal.

Question 50

fact or bluff Human capital is subject to depreciation. Over time, knowledge and skills may become obsolete or decline in value, requiring further investment in education and training to maintain their value

Answer 50

fact

Question 51

This is a theoretical model that is used to study the relationship between education and labor market outcomes, such as wages and employment. The model is based on the idea that education can be thought of as an investment in human capital, with the goal of increasing productivity and earning potential in the labor market

Answer 51

schooling model

Question 52

In the WHAT model, individuals make a decision about how much education to pursue based on the expected return on their investment. This return is calculated based on the expected increase in earnings that the individual will receive as a result of their education, compared to the cost of obtaining that education (e.g., tuition, lost wages while attending school

Answer 52

schooling

Question 54

often used to analyze the relationship between education and wages and to understand the factors that influence an individual's decision to pursue education.

Answer 54

WAGE SCHOOLING LOCUS

Question 55

WHAT is a graphical representation of an individual's earnings over time as he progresses through his career. The profile shows the individual's earnings at different ages, typically starting at age 20 and ending at age 60 or beyond.

Answer 55

age-earnings profile

Question 56

This can take many different forms, but they typically show the average or median earnings of individuals in a particular age group, such as 25-34, 35 44, 45-54, etc. The profile may also show the range of earnings within each age group, such as the lowest and highest earnings, or the 25th and 75th percentiles

Answer 56

Age-earnings Profile

Question 57

PROPERTIES OF Age-earnings Profile

Answer 57

▪ Positive slope. Age-earnings profiles are typically upward sloping, meaning that earnings tend to increase with age. This reflects the fact that individuals generally accumulate more experience and skills as they age, which can lead to higher wages. ▪ Concavity. Age-earnings profiles are often concave, meaning that the rate of increase in earnings slows as an individual gets older. Earnings rise over time at a decreasing rate. This may be due to factors such as the slowing of skill accumulation or the diminishing returns to experience. ▪ Asymptotes. Age-earnings profiles may approach an asymptote, or a level beyond which earnings do not continue to increase. This may be due to factors such as retirement or the end of an individual's career. ▪ Hump shape. Some age-earnings profiles may have a "hump" shape, with a rapid increase in earnings early in an individual's career followed by a slower rate of increase later on. This may be due to the fact that individuals invest more in education and training early in their career, leading to higher earnings

Question 58

The WHAT is an economic model developed by WHO that describes the relationship between an individual's earnings and their level of education. The model suggests that, on average, an individual's earnings increase with their level of education, with the rate of increase decreasing as the level of education increases

Answer 58

Mincer earnings function economist Jacob Mincer

Question 59

The Mincer earnings function takes the form of a linear equation, and is typically expressed as

Answer 59

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 = 𝑎 + 𝑏 ∗ 𝑦𝑒𝑎𝑟𝑠 𝑜𝑓 𝑒𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 + 𝑐 ∗ 𝑦𝑒𝑎𝑟𝑠 𝑜𝑓 𝑤𝑜𝑟𝑘 𝑒𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒 + 𝑑 ∗ (𝑦𝑒𝑎𝑟𝑠 𝑜𝑓 𝑤𝑜𝑟𝑘 𝑒𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒)^2 + 𝑒𝑟𝑟𝑜𝑟 𝑡𝑒𝑟m

Question 60

can be explained as a function of schooling and labor market experience using the Mincer equation;

Answer 60

Earnings