Econ 7040 Macroeconomic Analysis Tutorial 5
Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit
Macroeconomic Analysis (Econ 7040)
Tutorial 4: Human Capital and Labor Supply
1. Suppose that the level of human capital in country i is denoted by
Hi = e
(Ei)Li ,
where Ei are years of schooling, Li is labor, and φ(
) is a given function
φ(Ei) = a 
Ei if Ei < 4
φ(Ei) = a 
4+b 
(Ei 
4) if 4 
Ei < 8
φ(Ei) = a 
4+b 
4+c 
(Ei 
8) if Ei > 8,
where a,b,c are the returns to education in the 
rst 4 years, the following 4, and the years after the 8th, respectively.1
Calculate lnhi (hi = 
) for the following cases
(a) a = b = c = 0.1, and Ei = 7
Answer: Take natural logs to hi to get lnhi = φ(Ei). Thus,
φ(7) = 0.1 
4+0.1 
(7 
4) = 0.1 
7 = 0.7
(b) a = b = 0.1, c = 0.08, and Ei = 9
Answer:
φ(9) = 0.1 
4+0.1 
4+0.08 
(9 
8) = 0.88
(c) a = 0.1, b = 0.08, c = 0.06, and Ei = 11
Answer:
φ(9) = 0.1 
4+0.08 
4+0.06 
(11 
8) = 0.9
2. Use the equation above and the information on years of schooling from the empirical project database to measure per-capita human capital (hi) of Australia, Denmark, Canada, Norway, Hungary, U.S.A., and New Zealand. Assume that φ(Ei) is a piecewise linear function. In particular, φ(
) implies that in the 
rst 4 years of school, each year yields a return of 11% (a). In the next four years, each year yields a return of 8% (b), while beyond the 8th year of schooling each year returns 5% (c).
(a) Which of those countries has the largest level of human capital per-capita?
Answer: See Stata codes posted
(b) What is the average and standard deviation of hi in this sample of 7 countries?
Answer: See Stata codes posted
(c) Finally, what is the correlation between hi and income per-capita yi? Is this 7 countries sample representative of the 
population
of countries? What do you observe when you use the whole sample?
Answer: See Stata codes posted
2022-04-02