Easy-Come-Easy-Go: Moral Hazard in the Context of Return to Education

Journal of Business Ethics · 2014 · Volume 120 · Issue 2

Abstract

This empirical study advances the understanding of the theory of investment in human capital by outlining limitations to its applicability in the context of return to education. The study uses the concept of moral hazard to examine circumstances when financial support for education purpose generates less desirable post-graduation incomes. This study explores the relationship between financial support and post-graduation incomes using data from the Survey of Income and Program Participation that is designed to measure the economic situation of individuals. Results suggest that students are less likely to engage in moral hazardous behavior to the degree to which they are older and to the degree to which they receive costlier financial assistance.

Keywords

Moral hazard, Human capital investment, Financial support, Return to education

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