Answer to Question #73419 in Other Economics for Alba

Question #73419
Set up a model to study several periods of adulthood, and derive optimality conditions: (a) How much will he invest in the last period of his life, and why? (b) Assume for a moment that the individual is offered a magic pill that would give a one-time boost to human capital by amount P. For example, if he takes the pill in period j, instead of having Hij his human capital will then be Hij 0 = Hij + P. Suppose he is offered to take the pill either in period j or instead in j + 1. Can the human capital model tell him when to take the pill? (c) Now go back to the set-up of subquestion (a), and assume a rising return to human capital, or βj < βj+1: What does this mean for early versus late investments and why?
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