Risky Human Capital Accumulation with Endogenous Skill Premium

by Karol Mazur

ARTICLE | Economic Theory Bulletin | Vol.10, 2022

Abstract

I investigate the welfare properties of a model with risky human capital accumulation, imperfect substitution between skill types and endogenous skill premium. I show that whenever the insurance markets are incomplete, pecuniary externalities render the competitive equilibrium constrained inefficient with a sub-optimal level of human capital.

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