Search equilibrium and social and private returns to education

Holzner, Christian;Launov, Andrey
(2010) European Economic Review — Vol. 54, n° 1, p. 39-59 (2010)

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Authors
  • Holzner, ChristianDepartment of Social Policy and Labour Markets, ifo Institute for Economic Research, Germany
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  • Launov, AndreyUCLouvain
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Abstract
Social and private returns to education are computed using the structural estimates of an extended Burdett-Mortensen search equilibrium model. The extension includes different skill groups linked via a production function with variable degree of homogeneity, allowing thereby for a unimodal earnings density with a decreasing right tail. We find that the decreasing unemployment risk for higher skill groups and the absence of tuition fees in Germany increase private returns and lead to a too large share of high skilled individuals in the workforce, which is suboptimal from the social point of view. (C) 2009 Elsevier B.V. All rights reserved.
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Holzner, C., & Launov, A. (2010). Search equilibrium and social and private returns to education. European Economic Review, 54(1), 39-59. https://doi.org/10.1016/j.euroecorev.2009.04.002 (Original work published 2010)