The Role Of Wage Structure As Implicit Insurance On Human Capital In Developed Versus Underdeveloped Countries
No 292717, SSRI Workshop Series from University of Wisconsin-Madison, Social Systems Research Institute
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)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwssri:292717
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