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The Importance Of Education In The Labour Market According To The Economic Theory

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  • Marija Becic

    (University of Dubrovnik)

Abstract

Education is an important element of any knowledge-based modern economy, so there is an increased interest in researching its economic role. The primary link between education and economy is related to the labour market and income distribution. From the 60s onwards, a dominant link between education and labour market is the neoclassical theory of human capital. It is based on the assumptions of perfect competition, perfect information, and rational decision of an individual. However, many studies have shown the occurrence of market phenomena that is inconsistent with the explanations of this conventional theory, which led to the development of alternative models. Based on their key assumptions, models have different views on the role of education in the labour market and in the determination of wages. The dominant theory of human capital will be presented in this paper, and an insight in specific alternative theories that tackle this issue will be provided.

Suggested Citation

  • Marija Becic, 2014. "The Importance Of Education In The Labour Market According To The Economic Theory," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 23(1), pages 213-232, june.
    • Handle: RePEc:avo:emipdu:v:23:y:2014:i:1:p:213-232
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    More about this item

    Keywords

    education; theory of human capital; screening hypothesis; theory of job competition; labour market segmentation; radical theory;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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