The risk and return of human capital investments

Kristian Koerselman and Roope Uusitalo

Labour Economics, 2014, vol. 30, issue C, 154-163

Abstract: Human capital investments increase lifetime income, but may involve substantial risk. In this paper we use a Finnish panel spanning 22years to nonparametrically predict the mean, the variance and the skew of the present value of lifetime income, and to calculate certainty equivalent lifetime income at different levels of education. We find that university education is associated with about a half a million euro increase in discounted lifetime disposable income compared to vocational high school. Accounting for risk does little to change this picture. By contrast, vocational high school is associated with only moderately higher lifetime income compared to compulsory education, and the entire difference is due to differential nonemployment.

Keywords: Lifetime income; Risk; Education; Human capital; Investment (search for similar items in EconPapers)
JEL-codes: C33 I24 J31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: The Risk and Return of Human Capital Investments (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:30:y:2014:i:c:p:154-163

DOI: 10.1016/j.labeco.2014.04.011

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