 Real option, human capital investment returns and higher educational policyWei-Yei Hwang, Shu-Yi Liao and Mao-Lung Huang Economic Modelling, 2013, vol. 31, issue C, 447-452 Abstract: This paper incorporates the concept of real option into a modified Harris–Todaro model to investigate the relationship between higher education and unemployment rates. We found that the real option value of waiting to invest in graduate school education will decrease when the expected wage rate of labors with an undergraduate degree becomes relatively lower than that with a graduate degree. As a result, more undergraduate students will decide to go to graduate schools immediately after graduation. As the supply of labors with a graduate degree increases and the job creations fail to meet the increasing demand, those who cannot get a graduate-level job will be willing to accept job offers lower than their education level. Our modified Harris–Todaro model shows that it will lead to an increase in the number of unemployed and underemployed higher educated labors. This explains why the unemployment rates for higher educated labor are relatively high in some developed countries. Keywords: Real option; Human capital investment; Higher education; Unemployment rate (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:31:y:2013:i:c:p:447-452 DOI: 10.1016/j.econmod.2012.11.061 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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