Mincer Approach Under The Human Capital Investment Theory Case Study
Review the history of Human Capital Investment Theory is essential for a more comprehensive understanding of Mincer Approach.
The modern human capital theory was mainly developed in the last 50 years, its main contributor is Theodore Schultz, who was the Nobel Memorial Prize Winner in Economic Sciences in the year 1979. Shucltz (1961) delivered his address during the 1960 American Economic Association, entitled “Investment in Human Capital”, this is considered as the symbol which was born as the human capital theory. The human capital theory goes glory after him, great progress has been obtained in microeconomics, labor economics, growth theory and the theory of income …show more content…
There are many methods to estimate the rate of return to education, but, Mincerian equation is the only one could explain the rate return to education thoroughly and clearly. It’s the most common approach to estimate the rate of return to education in the modern era.
In the real life, rate return to education is not only influenced by the education years and working experience, but also influenced by other factors, for example, gender, race, and occupation etc. Scholars have made a serious of expansion to estimate the rate return to education more accurate. The expanded Mincer model specifies: lnws,x=a0+ρss+β0x+β1x2+iRjO_j+ε Where R_jis the rate of return for other variable, O_j is other variable. No change in other variables.
Mincerian function has a wide range of applicability in the present day labor economics and economics of education as a research tool, there exist a large number of studies that used the Mincerian earnings …show more content…
Efficiency wage theory analyzed the relationship between wages and productivity. According to this theory, labor productivity is the equation of real wages paid by the enterprise. This theory suggests that the higher the wages, the higher the level of effort on employees. This means that the increase of workers’ wages will help them increase the productivity, because workers work hard to respond high encourage from enterprises. On the other hand, to maintain profits by lowering wages, the company productivity may suffer