“IT DOESN’T hurt to get more education”, argues Donald Trump, a Republican presidential candidate. But too few Americans are acting on Mr Trump’s insight. Wage inequality has spiralled since the 1980s. In theory, as the returns to education grow, people should invest in more of it. The growing ranks of the educated, in turn, should cause the premium that skilled workers can command to shrink.
While this might have happened in the past, economists argue that more recently the supply of skilled workers seems to have fallen behind demand. Americans are blithely ignoring market signals. But while this seems plausible in aggregate, there is surprisingly little supporting microeconomic evidence.
One reason is that it is fiendishly difficult to measure how responsive Americans are to such price signals. One test is whether people in states with more demanding, better–paid jobs invest more in their education. But those jobs might have gone to places...Continue reading
Source :Business and finance http://ift.tt/1JTaB3H
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