The private rate of return on human capital may _____ the social rate because _____.

Question

Quizplus · Accepted Answer

The private rate of return on human capital may understate the social rate because schooling provides external benefits. This means that not all benefits from education accrue to the individual being educated but spill over to society. The private rate of return only takes into account the benefits received by the individual, while the social rate considers both the private benefits and external benefits to society. Therefore, the private rate of return is likely to be lower than the social rate of return.

The Private Rate of Return on Human Capital May _____