Key Ideas #5

Human Capital

I. The Economic Returns to Schooling—Theory

• Equalizing differences in a homogeneous world
• Optimal schooling with heterogeneous ability and opportunity
• HK production vs screening and sorting

II. Returns-to-Schooling ‘Metrics

• The causal effect of schooling on wages
• OVB
• Theoretical predictions for the sign of OVB (“ability bias”)
• Econometric solutions to the OVB problem
• Estimates of the returns to schooling
• Discount rate bias
• Evidence on the screening hypothesis

III. Returns to Experience

• Specific and general human capital
• Who pays for your human capital?
• Theoretical origins of the Mincer earnings function
• Estimates of the returns to experience