Microeconomic Policy

Microeconomic Policy

A New Perspective

Clem Tisdell and Keith Hartley

This thoroughly accessible textbook shows students how microeconomic theory can be used and applied to major issues of public policy. In this way, it will improve their understanding of both microeconomic theory and policy and also develop their ability to critically assess them. Clem Tisdell and Keith Hartley have expanded upon their previous successful work on microeconomics. As a result, this new book is considerably updated with substantial chapter revisions, as well as new chapters dealing with business management, ownership, environmental issues, public choice, defence, conflict and terrorism.

Chapter 12: Human Capital and Social Policy

Clem Tisdell and Keith Hartley

Subjects: economics and finance, industrial economics


INTRODUCTION: THE SCOPE OF HUMAN CAPITAL THEORY The economics of human resources offers explanations of individual and group (household) behaviour over the life-cycle. It provides a common analytical framework for apparently diverse issues such as: 1. Labour market behaviour, as reflected in job choice, training and retraining, wage determination, and age–earnings profiles, as well as job search and mobility (both domestically and internationally – brain drain), together with fringe benefits and employment contracts. Compulsory schooling and voluntary education, as well as health care and retirement. Income distribution and poverty. Family decisions, including marriage (a search process) and the choice of the number of children. Technical progress. Research and development leading to innovation involves the creation and dissemination (or the protection via patents) of the valuable information and knowledge which is initially embodied in human beings (for example, scientists). Economic growth. Investment in human capital through formal education, training and on-the-job experience contributes to economic growth in both developed and developing nations. Human capital also contributes to growth through innovation resulting from the training of scientists, technologists and potential innovators (the knowledge-based economy). The Solow growth model found that a substantial part of US growth was not accounted for by inputs of capital and labour. This Solow residual was assumed to be caused by technical progress resulting from innovation (although other factors such as the business environment were also found to be important). 2. 3. 4. 5. 6. The common characteristic of these activities is that they...

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