Real options and human capital investment
- 作者：Bas Jacobs
- 关键词：Human capital ; Higher education ; Risk ; Irreversible investment ; Real options ; Progressive taxation ; Education subsidies
- 刊名：Labour Economics
- 出版年：2007
- 期刊代码：53_09275371
- 类别：eco
- 出版时间：December 2007
- 卷：14
- 期：6
- 页码：913-925
- 文件大小：208 K
摘要
This paper extends the standard human capital model with real options. Real options influence investment behavior when risky investments in human capital are irreversible and individuals can affect the timing of the investment. Option values make individuals more reluctant to invest in human capital and, as a result, required returns on the investment increase. Real options may help to explain a larger human capital premium for higher education, smaller responsiveness of higher educational investments to financial incentives, and larger sensitivity of higher educational investments to low-return outcomes and human capital risks. Higher tax rates (or lower subsidies) depress human capital investments, but to a lesser extent than in the standard human capital model if not all direct costs are tax-deductible. A flat income tax remains neutral if education expenditures are fully deductible.