Investment in Graduate Education.

The wealth of a nation is greatly influenced by the quality of its labor force and this in turn depends upon the propensity of each individual to make the best use of his abilities and to improve himself through learning. To induce changes in these individual investment decisions is a basic target of economic policy. In this article the author examines the educational and occupational choices of graduate students in the natural and social sciences. Working hypothesis is that in making these choices, students attempt to maximize the present value of lifetime earnings. The main purpose is to test whether this hypothesis is, in fact, consistent with the actual choices of scientists. The first part of the article restates briefly the conventional theory of investment in human capital and its empirical implications in a certain world with perfect capital markets. The second part derives estimates of wage functions in different scientific fields. These estimates are then utilized to calculate rates of return and the life time earning streams which are associated with different types and levels of graduate education. The last part of the paper is an attempt to relate the observed choices of graduate students to lifetime earning differentials across fields.