Topic: Real world differences in human capital investment decisions between two types of workers. In class we have discussed how workers might make different decisions because they vary in any or some or all of the following:

-Preferences (e.g. personal discount rate)

-Opportunities (e.g. access to credit markets borrowing or lending)

-Costs (e.g. language barriers)

-Abilities (e.g. skills that translate to national versus local markets)

Examples of investments in human capital include:

-schooling decision of any kind (college, graduate, professional, vocational school),

-decision to relocate for a job or for a job search,

-decisions to acquire skills (internships, online courses, professional development).

General advice: Always choose a topic that is interesting to you. You might be curious about:

-a particular industry

-geographical region or country

-time period

-demographic subgroup(s) including race, gender, socio-economic status, cultural sub-group, etc.

-marketable skill

-effects of changes in: production processes, wage differences, unemployment rates

-effect of a change in policy (ex. increased financial aid from universities over time)

Prompt:

1.Find either an economics research article (the database EconLit is a good one to search, ) or an article from a reputable news source that

a)Compares two groups human capital investment decisions, or

b)Compares the human capital decision of one group before and after a change.

2.Identify a choice between two options that you are going to model. (Ignore any other options and simplify your paper to focus on only two options, such as graduate school or not.) Briefly explain how you would set up the choice. Because this is a real world comparison of options, it probably will not be as simple as the equations we put on the board: that is, more than the wage may vary over two schooling choices.

3.Be very specific about your assumptions about the two groups. State which group is the reference group, how the groups are similar and/or different, and how the second groups incentives, choices, and outcomes compare to the first.

4.Based on the model you have described (which is based on our discussions in class), predict how the groups human capital investment decisions would compare: (e.g. modern day, minority male college graduates are more likely to go to business school than minority male, college graduates in the 90s.) Be careful to explain why this prediction makes sense.

5.Briefly compare your prediction to the articles prediction or description of outcomes. Do they agree? Why or why not? It is perfectly fine to set up a model that disagrees with the article. For example, you may predict that more college students will try to get internships in a recession when the article predicts there will be more in a strong economy. What matters is that you explain why you think one way (based on your model) and, if the article disagrees, where you and the article might have parted ways in making your assumptions.