Question

Which of the following is an example of a social (external) benefit of human capital?

Options

• A firm recovering the cost of in-house training

• Educated citizens contribute to the process of democracy

• Higher earnings for the individual who invests

• A migrant earning a higher salary abroad

Answer 1

Social (external) benefits extend beyond the individual investor. An educated citizen contributes to the democratic process, which benefits society as a whole—this is a social benefit, unlike higher personal earnings, which are a private benefit.