ABSTRACT
Many labor supply choices require a substantial initial investment on the part of the worker. Workers undertake three major kinds of labor market investments: education and training, migration, and search for new jobs. Society's total wealth is a combination of human and nonhuman capital. Human capital includes accumulated investments in such activities as education, job training, and migration, whereas nonhuman capital includes society's stock of natural resources, buildings, and machinery. Like any other investment, an investment in human capital entails costs that are borne in the near term with the expectation that benefits will accrue in the future. Human-capital theory is used to analyze the decision to undertake a formal educational program on a full-time basis. Investments in human capital tend to be more likely when the expected earnings differentials are greater, when the initial investment costs are lower, and when the investor has either a longer time to recoup the returns or a lower discount rate.
