Contemporary Labor Economics 9th Edition by Campbell Mcconnell, Stanley Brue, David Macpherson, Robert Powell, David Colander

Exercise 3

Why is the internal rate of return from human capital investment subject to diminishing returns Explain the rationale for identifying the "diminishing rate of returns to education curve" as the "demand for human capital curve." Combine the demand for human capital curve with a "supply of investment funds curve" to explain why various individuals find it rational to invest in different amounts of human capital. What are the implications of your answer for the personal distribution of income Do you think that the educational system in the United States contributes to more or less equality in the distribution of earnings Explain. If you wanted to reduce inequality in the distribution of earnings, what policy recommendations would you make