Literacy Traps: Society-Wide Education and Individual Skill Premia

19 Pages Posted: 17 Mar 2009

See all articles by Vidya Atal

Vidya Atal

Montclair State University - Feliciano School of Business

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

John Gray

Cornell University

Travis Lee

Cornell University

Abstract

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

Atal, Vidya and Basu, Kaushik and Gray, John and Lee, Travis, Literacy Traps: Society-Wide Education and Individual Skill Premia. IZA Discussion Paper No. 4047. Available at SSRN: https://ssrn.com/abstract=1359983

Vidya Atal (Contact Author)

Montclair State University - Feliciano School of Business ( email )

Department of Economics
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Montclair, NJ 07043
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(973)655-7403 (Phone)

HOME PAGE: http://https://sites.google.com/site/vidyaatal/home

Kaushik Basu

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-2525 (Phone)
607-255-2818 (Fax)

IZA Institute of Labor Economics

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Germany

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
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John Gray

Cornell University ( email )

Ithaca, NY 14853
United States

Travis Lee

Cornell University ( email )

Ithaca, NY 14853
United States

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