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The Role Of Wage Structure As Implicit Insurance On Human Capital In Developed Versus Underdeveloped Countries

Lars Ljungqvist

No 292717, SSRI Workshop Series from University of Wisconsin-Madison, Social Systems Research Institute

Abstract: This paper explores the role of wage structure as implicit insurance on human capital. It is shown that smaller wage differentials in the developed world can be welfare-enhancing by providing implicit insurance while larger wage differentials in underdeveloped countries make investments in human capital riskier. In other words, the students in a developed country are insured against poor educational outcomes through the existence of well-paid alternative employments which are not present in the economy of a less developed country. These results arise in a general equilibrium model when there are no insurance markets for human capital.

Keywords: Research; Methods/; Statistical; Methods (search for similar items in EconPapers)
Date: 1992-10
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwssri:292717

DOI: 10.22004/ag.econ.292717

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