Showing papers in "Journal of Human Resources in 1973"

Wage Discrimination: Reduced Form and Structural Estimates

Abstract: Regressions explaining the wage rates of white males, black males, and white females are used to analyze the white-black wage differential among men and the male-female wage differential among whites A distinction is drawn between reduced form and structural wage equations, and both are estimated They are shown to have very different implications for analyzing the white-black and male-female wage differentials When the two sets of estimates are synthesized, they jointly imply that 70 percent of the overall race differential and 100 percent of the overall sex differential are ultimately attributable to discrimination of various sorts

Social Returns to Quantity and Quality of Schooling

Abstract: The authors find high but diminishing marginal returns to investment in expenditures per pupil per year The study suggests the desirability of increased educational quality in school districts with lower per pupil expenditures so as to equalize the returns to years and annual expenditure per student (Necessarily, there should be optimization in the way inputs are combined as the school systems move to new output levels-consolidation being a pertinent example) Since expenditure per student also affects years of schooling attained, a policy of improving the relative quality of school systems in poverty areas may partially offset inherited economic disadvantages

The Economics of Group Practice

Abstract: : The paper presents a theoretical and empirical discussion of how costs of outpatient medical practice vary with the size of the group providing services. It focuses upon the incentives facing the individual physician to keep the costs of his practice down and his work effort high. Cost and revenue sharing schemes are more prevalent as group size increases; therefore any individual physician is less likely to have to bear the financial consequences of his decision. Likewise, the reward he obtains from additional work effort falls. Thus, we would predict that total costs would rise as an individual physician's share of costs falls because of greater X-inefficiency, and that hours worked would fall as the individual physician's share of marginal revenue falls. Implications of our analysis for public policy is considered. The findings should give pause to those who believe that large clinics or large groups can give more efficient care than physicians working along or in small groups and hence that group practice should be subsidized.

Family Background, Secondary School Expenditure, and Student Ability

Abstract: Data on a large sample of high school seniors are used to estimate the relationship between ability test scores and various dimensions of educational input. The inputs examined include measures of each student's family background, the background of other students at the high school attended, and components of expenditure per student at the high school attended. The results suggest that: (1) a number of components of educational expenditure are significantly related to ability test scores, (2) both school integration and compensatory education are capable of altering the relation between ability and family background, and (3) school integration by family income level raises the ability test performance of low-income students while lowering that of high-income students by an equivalent or greater amount.

Real Returns to Medical Education

Abstract: Previous estimates of the profitability of investment in medical training contain an upward bias. These studies treat as the return to such investment the full difference in trained and untrained earnings, and thus they fail to account for expected labor/leisure substitutions associated with training investments. When this bias is eliminated, rents on medical training reported in these studies disappear. These findings fail to support the popular belief that the medical profession restrains entry by limiting medical school capacity. The paper suggests other ways in which the profession may be exploiting its monopoly power which go undetected in such profitability tests.

The Effect of College Quality on Earnings: Results from the N B E R-Thorndike Data

Abstract: Using Gourman's academic rating of colleges, we attempt to determine the extent to which returns to higher education (for a sample of 5,000) are due to quality of institution, after standardizing for various sociodemographic, background, and mental ability characteristics. Earnings of individuals in the top fifth of the undergraduate school quality distribution and in the top two fifths of the graduate distribution are significantly and substantially higher than earnings of others. However, it is unclear to what extent the quality variable is reflecting educational quality as opposed to individual scholastic abilities (by measuring selection of entrance to college).

Charity, Competition, and the Pricing of Doctors' Services

Abstract: There are two basic explanations of price discrimination in medicine. The traditional explanation is that the American Medical Association enforces sufficient price discipline to apply the theory of a price-discriminating monopolist. Members of the AMA explain price discrimination by the operation of a charity. This paper develops a charity-competition model in which price discrimination emerges as a consequence of utility maximization by the individual doctor and the necessity of market equilibrium. It is shown that the charity model is more consistent with available empirical evidence than is the monopoly model.

Theories of Hospital Inflation: Some Empirical Evidence

Abstract: This article examines three alternative hypotheses of hospital inflation: the demand-pull hypothesis, and cost-plus reimbursement hypothesis, and the labor cost-push hypothesis. The theoretical foundation of the cost-reimbursement hypothesis is explored; hospitals desiring to maximize quantity of hospital services or profits will not respond to cost-plus reimbursement by raising costs unless nearly all patients are covered by the plan. Empirical estimation of hospital average costs and average hospital wage rates yield no support for the cost-reimbursement hypothesis. A significant upward shift in hospital costs and hospital wages in the Medicare period, however, was obtained.

Interactions Between Educational Spending and Student Enrollment.

Abstract: This article specifies a two-equation model determining jointly two endogenous variables, public school expenditures per student and public school enrollment per capita, as functions of 16 exogenous variables, and estimates them for a sample of 79 urban areas using two-stage least squares. Expenditures per student are found to be positively related to costs of production and revenue availability and negatively to the enrollment rate and competing demands for revenues. Enrollment as a percent of the population is found to be positively related to spending per student and to the proportion of the population of school age and negatively to the proportion of Catholics.

Work and Welfare: The Case of Aid to Families with Dependent Children.

Abstract: Concentrating on Aid to Families with Dependent Children (ADC), the paper first explores the theoretical implications of the complex economic relationships between family stability, the demand for welfare, and the labor supply of men and women. Then, using 1960 Census data for New York City, regression equations are developed to test empirically: (1) the relationship between the proportion of female-headed households and ADC incidence; (2) the effect of ADC incidence on male and female labor force participation rates. Finally, the results are discussed and conclusions drawn regarding the important policy dilemmas and alternatives which welfare programs pose. Most of the recent research by economists into the relationship between work and welfare has concentrated on General Assistance, the welfare program which appears to present family units with a choice between working and receiving welfare, even though the choice is constrained by requirements that all able-bodied males work or look for work [1, 3, 7, 13]. Yet, by far the largest program of public assistance in the United States is the Aid to Families with Dependent Children (ADC); in 1971, 10.5 million people received aid on this program, while less than one million received General Assistance and another three million received Old Age Assistance, Aid to the Blind, or Aid to the Disabled. Thus, an understanding of the reasons why The author is Assistant Professor of Economics at New York University. * The author is indebted to Professor Jacob Mincer of Columbia University and William Johnson of RAND Washington for help in developing the theoretical and regression models as part of her Ph.D. dissertation at Columbia University. The dissertation findings are summarized in this paper. Funds from New York City's Human Resources Administration and Economic Development Administration and the Ford Foundation made the study possible. The Journal of Human Resources * VIII * Supplement This content downloaded from 157.55.39.104 on Sun, 19 Jun 2016 06:46:15 UTC All use subject to http://about.jstor.org/terms 104 1 THE JOURNAL OF HUMAN RESOURCES families seek ADC is fundamental to explanations of the demand for public assistance in general, before the possible effects of the welfare alternative on work incentives can be evaluated. Indeed, no discussion of the implications of suggested welfare reforms can hope to provide appropriate guidelines if it does not take account of the reasons why ADC caseloads rose so precipitously in the past decade. In earlier work, I examined descriptively the trends in the important factors contributing to family dependence on public assistance in New York City from 1957 to 1967 [6]. This paper reports on the findings of a complementary study of ADC incidence in New York City using Census data by health area in 1960. This data base enabled me to test analytically the more complex relations between family formation and ADC incidence and their subsequent effects on the labor force participation rates of men and of women, which limitations of the time series data precluded. Public assistance is available on the ADC program for all families with children in need and deprived of a male supporter either through death, disability, divorce, desertion, institutionalization, or, in the case of the unmarried mother, when there never has been a legal father. Many of these situations are obviously not those in which any economic choice is involved, but to the extent that some are, specifically those which concern the decision to live together or separately, the family formation choices may be affected by the welfare alternative. In this case, the circumstances under which a family may decide to separate form an integral part of the decision to seek ADC; this paper explores these connections theoretically and empirically. Secondly, the paper examines the subsequent effects on labor supply which the existence and nature of the ADC program and the family formation decisions suggest. It is often argued that there is little connection between employment conditions and the numbers on ADC because families on ADC are, by definition, without a working father. However, such an argument avoids the more fundamental question of the inability of adults to support their families through labor market earnings. The puzzle still remains: Why has there been such a startling increase in the number of families not supported by family members, but instead seeking government assistance? The last section will discuss the conclusions to be drawn from the results and relevant policy implications. THE THEORETICAL MODELS The models developed in this paper serve two purposes: (1) to explore the relationship between family stablity and the demand for ADC, and (2) to trace the subsequent relationship between welfare demand and labor supply. In focusing on the family decision to seek income support from the governThis content downloaded from 157.55.39.104 on Sun, 19 Jun 2016 06:46:15 UTC All use subject to http://about.jstor.org/terms

Empirical Studies of Welfare Dependency: A Survey.

Abstract: In the following article, 52 empirical studies of welfare recipients are surveyed. The object of the survey is to compare empirical evidence with the assumptions of current welfare reform proposals. Discovering a large gap between policy assumptions and research findings, the survey concludes with suggestions for both. Following the lead of their fellow taxpayers, social scientists have devoted increasing amounts of time and effort to the study of poverty and dependency; discussions of marginal tax rates, motivation, work incentives, and general welfare reform are now common in the journals of sociology and economics. Despite this extensive and growing interest in these problems, relatively little in the way of hard data has appeared in professional journals; most discussions continue to reflect the casual empiricism and bias of the authors. While one might conclude from this state of affairs that little empirical work has been done, this is not the case. On the contrary, federal agencies, especially the Manpower Administration of the U.S. Department of Labor, have funded a large number of research projects which bear directly on these issues. The results of these projects and other studies provide considerable insight into the dynamics of impoverishment and the potential of public assistance programs. Unfortunately, the limited exposure of these studies has made their results inaccessible to all but a handfull of social scientists. This brief survey attempts to help close the communications gap. In the following section, the results of 52 empirical studies are surThe author is Assistant Professor of Economics, University of Maryland. * Support for this study was received from the U.S. Department of Labor; all opinions are those of the author. An earlier version of this paper, entitled "Facts and Fictions of Welfare Reform," was released by the Department of Labor. The Journal of Human Resources * VIII * Supplement This content downloaded from 157.55.39.60 on Mon, 18 Jul 2016 04:11:05 UTC All use subject to http://about.jstor.org/terms 20 1 THE JOURNAL OF HUMAN RESOURCES veyed. For organizational and analytical purposes, these results are discussed in the context of welfare reform. In particular, I first attempt to identify the major assumptions of current and pending welfare reform (for example, the Work Incentive Program [WIN], the Talmadge Amendments, President Nixon's reform bill [H.R. 1], and Senator Long's proposed Guaranteed Job Opportunity Program) and then subject these assumptions to empirical scrutiny.' THE ASSUMPTIONS OF REFORM A. The Distinction Between Working and Nonworking Poor At the core of much welfare reform is the persistent distinction between "working" poor and "nonworking" poor. President Nixon's proposal (H.R. 1) is the most explicit in this regard, actually creating separate programs (OFP and FAP) to serve each target population. Senator Long's bill includes the same categorizations, while the present system of Aid to Families with Dependent Children (AFDC) explicitly excludes poor families headed by working fathers [40].2 The distinction drawn is based on the assumption that a poor person's employment status is stable over a considerable period of time. Unfortunately, there is little empirical justification for such a categorization. On the contrary, numerous studies and even official program statistics indicate that (1) there is a high degree of mobility between employment and dependency status, and (2) simultaneous work and welfare status is common. With regard to status mobility, AFDC program statistics [52] indicate that the median time on welfare is only 20 months. Longitudinal and retrospective studies of these recipients show that both before and after receiving public assistance, families are in the labor force [11, 22, 30, 32, 37, 46]. Similarly, studies of the working poor have demonstrated that substantial numbers (estimates run over 25 percent) of poor persons now working re1 It should be noted at the outset that the studies synthesized here are remarkably consistent in their findings and of generally high research quality. Hence, the usual caveats about the tentativeness of conclusions are omitted; only in a few places have I found it necessary to point out that available evidence is scarce. 2 The AFDC program is the existing mechanism for public assistance to families with children (currently about 11 million recipients), while the AFDC-U program serves families with unemployed fathers (approximately 660,000 recipients). The WIN program is the adjunct manpower training program for adult AFDC and AFDC-U recipients. The Talmadge Amendments (effective July 1, 1972) expand the WIN program and increase related work requirments. H.R. 1 is the Nixon Administration's (revised) welfare reform package, which would extend aid to the working poor. For more detail see [38, 48]. This content downloaded from 157.55.39.60 on Mon, 18 Jul 2016 04:11:05 UTC All use subject to http://about.jstor.org/terms

Variations in negative tax rates in current public assistance programs: an example of administrative discretion*

Abstract: With the welfare reform measures recently considered by the Congress, a great deal of attention has been paid to the marginal tax rate that might be used in any new program. Surprisingly, little attention is paid to the marginal tax rate in use in current programs. This paper considers the way in which the actual tax rate varies from the tax rate which is specified in federal statutes, and uses data from a survey of Vermont welfare cases to illustrate the large variance in average and, hence, marginal negative tax rates faced by current welfare recipients. The article also explores the ways in which this variation is created.

Racial Wage Discrimination and Employment Segregation

Abstract: This paper develops empirical tests of the utility analysis approach to wage discrimination within a given occupation In one section, the general equilibrium prediction of negatively sloped relative racial demand curves is tested using cross-section regressions In another section, actual employment segregation of whites and blacks is compared with the extent of segregation that would be expected on a purely random basis and the extent of segregation predicted by the stringent version of the utility analysis model The evidence indicates that the employment segregation prediction of the utility analysis model is doubtful, but clarifies the influence of ethnic groups and economic development on racial wage differentials

A Human Capital Approach to the Burden of the Military Draft

Abstract: This article estimates the present value of future income differences attributable to induction for draftees with various military and educational experiences. Using these estimates, a comparison is made of the conscription tax under alternative draft schemes. The results show that: (1) certain types of draftees gain in future income because of induction, and (2) a random draft of 18-year-olds not only minimizes the human capital burden of conscription but would result in an aggregate pecuniary gain for inductees.

Verbal Ability and Socioeconomic Status of 9th and 12th Grade College Preparatory, General, and Vocational Students.

Abstract: High schools in this country provide three basic programs: college preparatory, vocational education, and the general program. National data collected by Project TALENT have been analyzed for the first time and show that the two programs with defined goals, college preparatory and vocational education, enroll students from markedly different socioeconomic and academic ability populations. To provide separate schools for these two curriculums would result in a great deal of socioeconomic segregation. The general program, lacking defined goals other than a high school diploma, is the only program that shows a percentage increase in low academic ability and low socioeconomic students from the 9th to the 12th grade. This result holds for both males and females and is in spite of a very high dropout rate for both sexes. Implications of these findings are presented.

Income Distribution Effects of Higher Education Expenditures in California, Florida, and Hawaii

Abstract: In this paper we estimate the inter-income-class transfer effects resulting from public higher education expenditures in three states-California, Florida, and Hawaii. After-tax real income transfers will take place among income classes if some income classes receive instructional benefits that are financed by taxes imputed to other income classes. By comparing family income distributions of students to tax-burden income-size distributions, we attempt to estimate the extent of such transfers. The estimated patterns of after-tax real income transfers differ substantially for each state, implying that it is not possible to generalize on the basis of evidence from one state alone.

A Dynamic Analysis of Labor Force Participation of Married Women of Childbearing Age.

Abstract: The study for the first time relates labor force behavior of a panel of married women of childbearing age, over a ten-year period, to economic and noneconomic variables. The dependent variable, labor force attachment, is measured by current work behavior, work plans, and actual labor force participation for each woman over a decade. When this variable is related by multiple regression analysis to economic and sociological variables, the most important influences on a wife's labor force participation are found to be expected family size and wife's education. Since education for women is increasing and family size is expected to decrease, there should be an important increase in the labor force participation of younger married women in the coming decades.

Rates of Return on Investment in Education: Recent Results for Britain.

Abstract: The paper utilizes the results of an earnings follow-up sample survey to the 1966 Census to calculate for the first time private and social rates of return to education in Britain, based on a national representative sample of educated males. The results are subjected to a number of sensitivity tests on the assumptons made. The generally high private rates of return suggest a considerable degree of private underinvestment in education. Excluding externality effects, the social rates of return estimates seem to indicate a relative overexpansion in the graduate part of the university sector and social underinvestment in part-time, higher level technician training.

The Impact of the Extended-Care Facility Benefit on Hospital Use and Reimbursements Under Medicare.

Abstract: The coverage of extended-care facilities (ECFs) under Medicare was intended as a means of shortening patient stays in short-term hospitals and reducing the overall costs of the program. Regression analysis of state data on the average hospital stay for Medicare patients in 1967 and 1968 shows that the use of ECFs has, in fact, contributed to shorter stays. Further, the savings in hospital reimbursements, estimated from the regressions, more than outweighed the costs of ECF care in both years.

A Statistical Analysis of the O E O Experiment in Educational Performance Contracting

Abstract: Private educational firms claimed to be able to substantially increase the reading and mathematics achievement test scores of disadvantaged students. The OEO Performance Contracting Experiment tested this claim. Although analysis of experimental effects is complicated by imperfect matching of experimental and control students and by measurement error in pretest scores, there are statistical techniques for dealing with these problems. Our results indicate that the private companies which participated in the experiment did not have the capability of bringing about any great improvement in the educational status of disadvantaged students.

Determinants of Individual Success in On-The-Job Training.

Abstract: This study of on-the-job training utilizes data on individual trainees. Dependent variables are: whether the trainee graduates or drops out, whether he stays with the sponsoring company or leaves after training, his productivity improvement, and his wage gains. With the exception of the trainee's personal characteristics, the explanatory variables have a similar influence on each of the dependent variables. In explaining variation in each of the success measures, the personal characteristics of the trainee are generally not important; his labor market characteristics are important only for wage changes; and the company and training program characteristics are extremely important.

The Effect of Extending Minimum Wages to Cover Household Maids

Abstract: Recent federal legislation has proposed that minimum wage laws be extended to cover one of the largest occupational groups currently excluded-household maids. This paper estimates supply and demand functions for maids using cross-section data. The results strongly suggest that households are very quick to find substitutes as the relative cost of their maids rises. Demand for maids would have declined by over 30 percent if a minimum wage of $1.60 had been enforced in 1972. Historical trends in the occupation are consistent with the cross-section analysis.

The Impact of Medicaid on State and Local Health and Hospitals Expenditures, with Special Reference to Blacks

Abstract: A simple demand and supply model is proposed to "explain" the wide variations in state and local government expenditures on health and hospitals, and to assess the impact of Medicaid in satisfying the health needs of blacks. The model shows that a large percentage of the variation can be explained and that blacks tend to demand and evidently receive a higher proportion of public health care on the basis of their income than one would expect. The discriminatory effects of Medicare are more than offset by a combination of Medicaid and state and local spending on health care, although the continuing racial health gap indicates that state and local spending has not offset the wide differences between blacks and whites in private and Medicare spending.