Investigating investment in human capital in the presence of government intervention

The purpose of this PhD proposal is to investigate investment in human capital in the presence of government intervention. It will as such investigate individuals’ decision to invest in firm and/or industry specific and general human capital, either at their place of work or through the state educational system. It will then proceed to study the complex interaction between worker and firm decisions and government policy instruments. The key three areas of research concern the effects of government policies on the risk borne by the individual investor in human capital, the interaction between government policy and the characteristic of individuals, and cross country effects of welfare, fiscal and educational policies.

Investment risks: Whilst human capital may increase wages it is also known to increase wage risk. This PhD proposal will investigate how the design of the welfare state, the tax system and state educational provision within the nation state may mitigate some of the risk involved in investment in human capital.

Individual characteristics: The PhD research will in this respect involve in-depth analysis of how individual characteristics interact with government actions. For instance, with the genders typically having different attitudes to risk and the general result of females being more risk averse than males, it is possible that females may benefit proportionally more from the educational subsidies than males.
Cross border effects: Educational policies may also have cross border effects, even in presence of no benefit or tax competition. With free movement of workers, the benefits of subsidies to the educational sector can easily leak abroad. This proposal will seek to investigate the degree to which governments can compete strategically through the instruments associated with educational policies.
Methodology: The PhD will seek to investigate the issues above from an applied microeconomic perspective. Utilising a mainly theoretical methodology, the research may also in the latter stages apply empirical methods to test the main conclusions of the theoretical findings.

Expected contribution to academic literature: Whilst the role taxation instruments have had on human capital accumulation been studied in the past, the literature has yet to reach a point where a solid consensus has emerged. The interaction between the social insurance provisions of government on investments is a largely neglected area of research. This PhD proposal will seek to contribute to these areas of research.

Expected Policy Relevance and Impact: Understanding how a government’s fiscal stance and welfare provision may have unintended and hitherto unknown effects on the decision to invest in human capital is of great policy importance. This proposal has the potential to shed light on effects that affect workers, firms and society at large and thereby provide a platform that could inform policy makers as they design their fiscal, welfare and educational policies.