Theory and facts

This chapter presents a few theoretical insights and some facts regarding the interaction between labour market institutions and the incentives to accumulate skills. It starts with a brief theoretical survey on human capital, in relation to the efficiency of credit markets and labour markets. The different roles played by various institutions in human capital accumulation are discussed. The discussion then turns to types of education as classified by UNESCO with ISCED-1997 (International Standard Classification of Education) and their supply in several OECD countries. The relation between wages and education, unemployment and education, and mobility and education are examined, along with the financing of education (as a fraction of GDP, per pupil/student and by origin, i.e., public or private). Finally, it is noted that Europe drastically differs from the US in that the higher priority given to secondary education is accompanied with under-funding of tertiary education and notably advanced tertiary education.