Economic theory predicts that investment on scarce goods yields higher returns, since rarity represents a source of competitive advantage.
In Italy, the system of education displays an apparent paradox: despite the scarcity of the “good” education, investment on education yields low private returns, as proxied by earnings difference between a university and a secondary school graduate. In 2008 and 2011:
– population share (25-64 years) with completed tertiary education was 14 in both years, a much lower value than the average for OECD countries, 43 and 31;
– earnings from employment for tertiary education were 150 and 148, against higher average values of 152 and 157 for OECD countries.
An analysis of the interaction between demand and supply of human capital offers possible explanations for the observed phenomenon. First of all, the firms’ difficulties to find adequate competences and skills compatible with the use of new technology reduce the return of education. The resulting decrease in the supply of high qualification restrains, even more, the demand of competences, triggering a vicious cycle. The roots of this circle can be found in the existence of informative problems and in the peculiar structure of labor market.
Informative problems in the recruitment stage are reflected by the difficulties of firms to recognize superior competences of high qualified individuals. In fact, the training offer provided by the scholastic system is not labor-market oriented; hence, the educational offer doesn’t provide students with distinctive labor skills compared with those of individuals with lower educational attainments.
The problem is sharpened by the labor market conditions. One concern is the limited labor mobility that, combined with the prevailing structure of small and medium businesses, has hampered the flexibility of labor market at the expense of a low human capital.
A higher investment in R&D might be beneficial through two channels: directly, by requiring more educated individuals for research activities; indirectly, because investment in new technology allows to increase labor market flexibility and, therefore, is likely to result in the request of a higher human capital. Besides, the institute of internships (already included in some universities’ programs), providing labor skills, can reduce the size of the mentioned informative problems.
Moreover, the analysis of wage premia cannot exclude the concern for horizontal equity, namely, for the wage differentials of individuals with the same observable characteristics, including education. As underlined by Franzini and Reitano, since wage differentials within graduates are even deeper than the ones across individuals with different educational attainments, the analysis should focus also on the differences in unobserved characteristics, such as individual abilities, as well as on the differences in the quality of education provided by different institutions.
All in all, the research of a solution to the Italian paradox is an issue of primary order. Investing in knowledge and increasing the value of education on labor market are necessary requirements for the country’ s development.
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