Consider a hypothetical economy in which each worker has to decide whether to acquire education and become a high-skilled worker or remain low-skilled. Education carries a cost of C. Assume that interest-free education loans are available to everybody. Let IH and IL denote the incomes earned by a high- and low-skilled worker respectively. These incomes are defined as IH = (1 + ?)H and IL = (1 + ?)L, where H and L are constants (H > L) and ? is the fraction of the population that decides to become high skilled. This formulation captures the idea that a person's productivity is positively linked not only to his own skills, but also to that of his fellow workers. Assume that all individuals simultaneously choose whether or not to become skilled.

(3) Consider a hypothetical economy in which each worker has to decide whether to acquire education and become a high-skilled worker or remain low-skilled. Education carries a cost of C. Assume that interest-free education loans are available to everybody. Let In and I denote the incomes earned by a high- and low-skilled worker respectively. These incomes are defined as IN = (1+ 0) H and It = (1 + 0)L, where H and L are constants (H > L) and 0 is the fraction of the population that decides to become high skilled. This formulation captures the idea that a person's productivity is positively linked not only to his own skills, but also to that of his fellow workers. Assume that all individuals simultaneously choose whether or not to become skilled. (a) Describe the complementarity. (b) Show that if H -L