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Ollscoil na hÉireann, Gaillimh GX_____
National University of Ireland, Galway
Summer Examinations 2009 / 2010
Exam Code(s) 1EP1, 1EP2, 2EP2, 1MEE1, 1EE1, 1EE2, 2EE2, 1MEM1, MHE Exam(s) M.A. & M.Econ.Sc. (Economic Policy Evaluation & Planning) M.A. & M.Econ.Sc. (Economic & Environmental Modelling) M.Sc. in Health Economics Module Code(s) EC Module(s) Public Sector Economics Paper No. 1 Repeat Paper External Examiner(s) Professor Robert E. Wright Internal Examiner(s) Mr. Brendan Kennelly Dr. Mary Silles Instructions: 4 Questions, Attempt any 2. Duration 3 hours No. of Pages 3 Department(s) Economics Course Co-ordinator(s) Dr. M. Silles Requirements : MCQ Handout Statistical Tables Graph Paper Log Graph Paper Other Material
Graduate Public Sector Economics (Summer) EC Instructions: 4 Questions, Attempt any 2.
- Consider the typical formulation of the human capital investment problem: where T denotes the age at which the individual retires from work, and x represents the duration of his or her schooling. 1( i ). Interpret the two terms in this equation. (10 marks) 1( ii ). Derive the marginal rate of return to schooling. [Use Leibniz integral rule which is provided below]. (20 marks) 1( iii ). Using the information from part 1( ii ), show that the marginal rate of return to schooling declines with the date at which study commences. What are the implications of this result for education policy? (20 marks)
- A vast literature documents a strong positive association between education and labour market earnings. What is unclear is the extent to which these estimates reflect a causal relationship. 2( i ). Explain why standard OLS estimates of the rate of return to education might not yield credible estimates of the true causal effect of education on earnings. (10 marks) 2( ii ). A number of studies have relied on panel techniques to provide evidence of the causal relationship between education and earnings. Explain the problems which are encountered in panel studies and how these might be addressed. (20 marks) 2( iii ). The institutional features of the education system have been used in several studies to form IV estimates of the rate of return to schooling. Explain why this method may be effective in purging the returns to education of possible sources of biases. (20 marks)
- The theory of human capital and the theory of signalling both offer explanations for why workers with higher levels of education tend to have higher wages.
