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6. Many economists have found a strong link between education and per-capita income. Why
would it make sense to call education human capital?
Solution
E conomists regard expenditures on education, training, medical care, and so on as
investments in human capital. They are called human capital because people cannot be
separated from their knowledge, skills, health, or values in the way they can be separated
from their financial and physical assets.
Until the early 1960s, college graduates earned about 45 percent more than high school
graduates. In the 1960s, this premium from college education shot up to almost 60 percent, but it
fell back in the 1970s to less than 50 percent.
Thinking about higher education as an investment in human capital helps us understand why the
fraction of high school graduates who go to college increases and decreases from time to time.
When the benefits of a college degree fell in the 1970s, for example, the fraction of white high
school graduates who started college fell

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6- Many economists have found a strong link between education and per-.docx

  • 1. 6. Many economists have found a strong link between education and per-capita income. Why would it make sense to call education human capital? Solution E conomists regard expenditures on education, training, medical care, and so on as investments in human capital. They are called human capital because people cannot be separated from their knowledge, skills, health, or values in the way they can be separated from their financial and physical assets. Until the early 1960s, college graduates earned about 45 percent more than high school graduates. In the 1960s, this premium from college education shot up to almost 60 percent, but it fell back in the 1970s to less than 50 percent. Thinking about higher education as an investment in human capital helps us understand why the fraction of high school graduates who go to college increases and decreases from time to time. When the benefits of a college degree fell in the 1970s, for example, the fraction of white high school graduates who started college fell