The Return on Educational Investment in the Face of Depreciation: A New Formulation and Tries to Apply on Individual Data

Abstract

In this article, we propose to re-examine the relationship between training-returns into ‎studying the factors that influence individual decisions. Previously, it was mainly the ‎expected returns that encourage the individual to rationally make the investment decision.‎However, this relationship between training and expected earnings is not so obvious. This ‎depends, among other things, on the effect of the depreciation of the stock of acquired human ‎capital, which we propose a new formalization. Let us thus detect a relation which shows that ‎the variation of the net salary is positive as long as the variation of the gross salary is positive. ‎In other words, the net investment will only be positive if the depreciation does not exceed the gross ‎investment.‎If applicable, the effect of the depreciation will lead to a reduction in the wage gap between ‎skilled and unskilled workers. This result means that even when returns are different, wage ‎convergence may still exist.‎ The results of this study are applicable in terms of budget and forecast of funds intended for training, and to trace the policies of labor market regulation and the problem of unemployment of graduates.

Keywords: Investment, human capital, depreciation, individual gain, model.

JEL classification: E24, I21, J24, J31.

DOI: 10.7176/JEP/11-12-10

Publication date: April 30^th 2020