ABSTRACT
The human capital concept developed, however, separately from the economic growth literature with the influential works of Mincer (1958) and Becker (1962, 1964). Mincer attempted to explain the differences in the personal income (wage) distribution by the investment in human capital. He analysed how rational agents freely determine the time they allocate to studying (or training) or working. The cost of studying is the direct cost of education (tuition fees) plus forgone labour earnings, while the return to studying comes from higher future earnings. Initially, because the return to extra years of education is decreasing, the value of future earnings exceeds the cost of studying and the individual continues to invest in education. In equilibrium, the benefit of an extra year of schooling equals its costs. This analysis – based, as it does, on marginalism – is generally regarded as the theoretical foundation of empirical labour economics (Coulombe, Tremblay 2009).
