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Advanced human capital requires "basic" human capital as an input. Physical capital does not, in general, have such hierarchical structure. This paper models optimal investment in hierarchical human capital as well as nonhierarchical physical capital. The authors analyze the steady state, transition dynamics, and endogenous growth properties of the system. The optimal program exhibits non-monotonicities in human capital stocks. This result has important implications for the optimal timing of investment in hierarchical human capital. The analysis also addresses the debate regarding the distribution of education expenditures and the divergence between ex-post and ex-ante rates of return to education.

Prostitution is a multi-billion dollar, globally distributed, low-concentration service industry that is receiving increasing attention in the economics literature. This article focuses on a widespread, but little studied, feature of this environment-the role of intermediaries (pimps or brothel owners) on market outcomes. Prostitution laws and markets are perhaps unique in that transactions between principals (prostitutes and johns) are legal in many countries, while intermediary activity (pimping) is illegal. After surveying the varying cross-country legality of agents we develop a simple theoretical model to analyze how the presence or absence of intermediaries shifts the distribution of market surplus. We show that eliminating pimps and brothels may shift surplus in non-obvious ways, depending on the precise function they perform and on whether equilibrium is pooling or separating across ''high quality'' and ''low quality'' market segments. The implications of alternative policy regimes (intermediaries legal or illegal) are considered.

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We employ a new data set from Suriname to estimate private and social returns to technical, vocational and two tracks of general education (mathematics and language). Return estimates are based on gender-specific wage equations, corrected for sample selection bias and adjusted for unemployment. We find that, for both genders, returns to either general track exceed returns to technical or vocational education. Female returns to the language track exceed those to the mathematics track from the social and private perspective, while for males, both social and private returns in the mathematics track exceed those in the language track.

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In this paper we demonstrate that the axiomatic measurement approach developed in the poverty and inequality literature can be usefully applied to the measurement of corruption. We develop a conceptual framework for organizing corruption data and discuss several objective, aggregate corruption measures consistent with axiomatic requirements. We then provide an empirical application of the methodology and estimate the respective corruption measures for a sample of over 25 countries during the year 2000. Our empirical analysis reveals significant discrepancies between the country rankings generated by these measures and those provided by the Corruption Perception Index (CPI) from Transparency International. To our knowledge, this paper represents a first analysis of corruption measurement using an axiomatic framework.