Real Options and Human Capital Investment∗

@inproceedings{Jacobs2006RealOA,
  title={Real Options and Human Capital Investment∗},
  author={Bas Jacobs},
  year={2006}
}
This paper extends the standard human capital model with real options. Real options affect investment behavior when risky investments in human capital are irreversible and individuals can affect the timing of the investment. Option values make individuals more reluctant to invest in human capital and required returns on the investment increase. Higher tax rates (or lower subsidies) depress human capital investments, but to a lesser extent than in the standard human capital model. A flat income… CONTINUE READING

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