Question: 5.5 Education is a continuous variable, where eh is the years of schooling of a high-ability worker and el is the years of schooling of

5.5 Education is a continuous variable, where eh is the years of schooling of a high-ability worker and el is the years of schooling of a low-ability worker.

The cost per period of education for these types of workers is ch and cl , respectively, where cl 7 ch.

The wages they receive if employers can tell them apart are wh and wl. Under what conditions is a separating equilibrium possible? How much education will each type of worker get? (Hint: See Solved Problem 18.4.) M

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