Literacy Traps: Society-Wide Education and Individual Skill Premia
19 Pages Posted: 17 Mar 2009
Using a model of O-ring production function, the paper demonstrates how certain communities can get caught in a low-literacy trap in which each individual finds it not worthwhile investing in higher skills because others are not high-skilled. The model sheds light on educational policy. It is shown that policy for promoting human capital has to take the form of a mechanism for solving the coordination failure in people's choice of educational strategy.
Keywords: education, literacy, O-ring, skill formation, traps
JEL Classification: D20, I28, J31
Suggested Citation: Suggested Citation