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Investment in Human Capital and the Appropriate Discount Rate

Author

Listed:
  • Renas, Stephen
  • Cebula, Richard

Abstract

This study develops a theory of investment in human capital which rests on the assumption that an individual will choose to remain in school if the present value of the future income stream associated with additional education exceeds that associated with the present level of education. The paper hypothesizes that the marginal rate of time preference is a function of one's socioeconomic status and thereby provides a systematic framework for explaining dropout rates.

Suggested Citation

  • Renas, Stephen & Cebula, Richard, 1971. "Investment in Human Capital and the Appropriate Discount Rate," MPRA Paper 51265, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:51265
    as

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    File URL: https://mpra.ub.uni-muenchen.de/51265/1/MPRA_paper_51265.pdf
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    References listed on IDEAS

    as
    1. W. Lee Hansen, 1963. "Total and Private Rates of Return to Investment in Schooling," Journal of Political Economy, University of Chicago Press, vol. 71(2), pages 128-128.
    2. John Conlisk, 1969. "Determinants of School Enrollment and School Performance," Journal of Human Resources, University of Wisconsin Press, vol. 4(2), pages 140-157.
    3. Charles B. Nam & A. Lewis Rhodes & Robert E. Herriott, 1968. "School Retention by Race, Religion, and Socioeconomic Status," Journal of Human Resources, University of Wisconsin Press, vol. 3(2), pages 171-190.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Cebula, Richard & Vedder, Richard, 1972. "A Note on Migration, Economic Opportunity, and the Quality of Life," MPRA Paper 49824, University Library of Munich, Germany, revised 06 Jul 1972.

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    More about this item

    Keywords

    investment in human capital; collective decision-making; rate of time preference; poverty; school drop-out rates;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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