2 Comment on the following statements Given the work life cy

2. Comment on the following statements: Given the work life cycle of the \"traditional\" woman, it may be rational for women to invest less in human capital than men Older workers are less mobile geographically than young workers An economic recession tends to stimulate college enrollment One of the disadvantages of Social Security\'s benefit reduction rate (reducing benefits if you earn above a certain amount while drawing on it) is that it biases away from human capital investment and towards bonds and stocks a. b. c. d.

Solution

2.

a. The traditional women in this context would be the one whose role is defined in terms of taking care of the family. Usually such women look after the kids and also takes care of household chores. In such a case, where these women know that they won\'t really have the time to acquire new skills, they won\'t invest in them.

b. There is some merit in this statement. As we get old, we specialize in our profession and the chances of switching a job in another city/own may also reduce if the compensation is not attractive. This happens largely because one may have to move around with the entire family and that can be very costly.

c. An economic recession would increase the rate of unemployment. Unemployed civilians can opt for higher education to enhance their skill set which will improve their chances of getting a job in an otherwise competitive market.

d. This may or may not be entirely true. Lets see what will happen if benefits are reduced if one earns above certain amount. The individual may spend the excess savings over consumption goods. Alternatively, they may invest that money in stocks and bonds. The individual preference towards stocks and bonds matters a lot.