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Holzner, Christian; Launov, Andrey (2010): Search equilibrium and social and private returns to education. In: European Economic Review, Vol. 54, No. 1
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Social and private returns to education are computed using the structural estimates of an extended Burdett-Mortensen search equilibrium model. The extension includes different skill groups linked via a production function with variable degree of homogeneity, allowing thereby for a unimodal earnings density with a decreasing right tail. We find that the decreasing unemployment risk for higher skill groups and the absence of tuition fees in Germany increase private returns and lead to a too large share of high skilled individuals in the workforce, which is suboptimal from the social point of view. ; Social and private returns to education Search frictions