Posted Content•
The causal effect of education on earnings
TL;DR: This paper surveys the recent literature on the causal relationship between education and earnings and concludes that the average (or average marginal) return to education is not much below the estimate that emerges from a standard human capital earnings function fit by OLS.
Abstract: This paper surveys the recent literature on the causal relationship between education and earnings. I focus on four areas of work: theoretical and econometric advances in modelling the causal effect of education in the presence of heterogeneous returns to schooling; recent studies that use institutional aspects of the education system to form instrumental variables estimates of the return to schooling; recent studies of the earnings and schooling of twins; and recent attempts to explicitly model sources of heterogeneity in the returns to education. Consistent with earlier surveys of the literature, I conclude that the average (or average marginal) return to education is not much below the estimate that emerges from a standard human capital earnings function fit by OLS. Evidence from the latest studies of identical twins suggests a small upward "ability" bias -- on the order of 10%. A consistent finding among studies using instrumental variables based on institutional changes in the education system is that the estimated returns to schooling are 20-40% above the corresponding OLS estimates. Part of the explanation for this finding may be that marginal returns to schooling for certain subgroups -- particularly relatively disadvantaged groups with low education outcomes -- are higher than the average marginal returns to education in the population as a whole.
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27 Aug 2009
TL;DR: In this paper, a simple two-period model was developed to examine the parent's optimal choice of children's time for working in the labor market and attending schools, and it was shown that when education return is high and the household is willing to endure extra hardship caused by the child attending school, the coexistence of schooling and poverty can emerge, when the wage rate for child labor and schooling fees are higher than education return, affluence and child labor can coexist.
Abstract: Revision with unchanged content. In this book, we first develop a simple two-period model to examine the parent’s optimal choice of children’s time. We identify factors such as wage rate, school fees, education returns, degree of children’s altruism toward their parents and the parents’ discounting rate that influence the parents’ optimal choice, and discuss their impacts on the optimal choice. Two basic uses for Children’s time are: working in the labor market and attending schools. Schooling today may make children more productive in the future. The opportunity cost of schooling is the forgone wage rate in the labor market. Allocation of children’s time is therefore mainly determined by education return, wage rate in labor market and school fees. Many existing models in the literature cannot explain the coexistence of schooling, poverty and the coexistence of child labor and affluence. We extend our basic model to explain the above two paradoxes. We show that, when education return is high and the household is willing to endure extra hardship caused by the child attending school, the coexistence of schooling and poverty can emerge. On the other hand, when the wage rate for child labor and schooling fees are higher than education return, affluence and child labor can co-exist.
4 citations
TL;DR: This paper examined whether graduates from the elite Tokyo university receive a preferential treatment in hiring and promotion in the high civil service and found no evidence that where one went to school may matter in the hiring stage, but no significant evidence for a similar favoritism in promotion in later stages.
Abstract: In a dramatic move to confront the prolonged and often violent student protests, the Japanese government ordered that every student repeat the school year at the University of Tokyo in 1969. The directive had the inadvertent effect of denying those graduating from high school in that year an opportunity to seek admission to the nation's foremost institution of higher education. This paper uses the highly unusual event as a natural experiment to examine whether graduates from the elite Tokyo university receive a preferential treatment in hiring and promotion in the high civil service. The University of Tokyo traditionally predominates as the chief supplier of elite bureaucrats. As a result of the 1969 incident, however, the entering class in the high civil service four years later in 1973 contained a significantly lower proportion of graduates from the University of Tokyo than in usual years. Comparing the career experiences of the entering class of 1973 with those of adjacent entry cohorts, we do find some evidence that where one went to school may matter in the hiring stage, but no significant evidence for a similar favoritism in promotion in later stages.
4 citations
Posted Content•
TL;DR: In this paper, the impact of different policies on the investment of families in the education of their children is analyzed, where families make decisions on the level of human capital of their offspring with a view to the future income that this capital will entail.
Abstract: We analyze in this working paper the impact of different policies on the investment of families in the education of their children. In the model we present, families make decisions on the level of human capital of their offspring with a view to the future income that this capital will entail (under the assumption that higher education levels yield higher expected income). Families optimal investment in education depends on their preferences (summarized by their time discount and risk aversion parameters) and their circumstances (initial wealth, parents education, and children s natural abilities). The public authority designs a balanced tax/subsidy scheme in order to maximize aggregate welfare. We compare the case of a purely utilitarian planner with one that cares about the equality of opportunity.
4 citations
TL;DR: This paper used a sample of male workers to estimate public and private wage structures and the public wage premium for Italy and found that public employees have on average lower unobserved wage potentials in both sectors than private employees, but work in the sector where they benefit from a comparative wage advantage.
Abstract: This paper uses a sample of male workers to estimate public and private wage structures and the public wage premium for Italy. Results from a model with endogenous sector and schooling suggest that public employees have on average lower unobserved wage potentials in both sectors than private employees, but work in the sector where they benefit from a comparative wage advantage. Schooling is positively correlated with wages in both sectors, and controlling for that is crucial to get more reliable estimates and predictions. The associated average unconditional public wage premium is 12 per cent. The net premium is 9 per cent, but not statistically significant.
4 citations