Showing papers on "Human capital published in 1985"

Human Capital, Effort, and the Sexual Division of Labor

Abstract: Increasing returns from specialized human capital is a powerful force creating a division of labor in the allocation of time and investments in human capital between married men and married women. Moreover, since child care and housework are more effort intensive than leisure and other household activities, married women spend less effort on each hour of market work than married men working the same number of hours. Hence, married women have lower hourly earnings than married men with the same market human capital, and they economize on the effort expended on market work by seeking less demanding jobs. The responsibility of married women for child care and housework has major implications for earnings and occupational differences between men and women.

Human capital and the rise and fall of families

Abstract: This paper develops a model of the transmission of earnings, assets, and consumption from parents to descendants. The model assumes utility-maximizing parents who are concerned about the welfare of...

Earnings, Schooling, Ability, and Cognitive Skills

Abstract: Conventional estimates now available for a large number of countries generally indicate that the social returns to education are positive, large, and competitive with returns to investment in physical capital.' That such estimates are good guides for public resource allocation has, however, been questioned. The heart of the problem lies in the interpretation of the positive relationship between the education and the earnings of workers: whether, as the conventional estimates assume, the coefficient of the education variable in the earnings function measures the effect on the productivity of workers of human capital acquired in school. It has been hypothesized *that education in part, or instead, represents screening for native ability and motivation, or credentialism, and that as a consequence conventional measures of the social benefit of education are substantially upward biased.2 In this paper we attempt to distinguish the influence on earnings of cognitive achievement, native ability, and years of education as a means of adjudicating the human capital, screening, and credentialist hypotheses. Our econometric analysis is based on two rigorously comparable micro data sets from Kenya and Tanzania, generated by surveys of the urban wage-labor force specifically for this study. These data sets contain the usual variables found in earnings function estimates of the benefits of schooling-individual earnings, years of education, and years of employment experience. In addition, they contain two variables-measures of the worker's cognitive skills and of his or her reasoning ability-not previously found in studies of developing countries and only rarely found in studies of the education-earnings relationship in developed countries.3 With these variables we can estimate the direct effects on earnings of cognitive skills, ability, and years of schooling. By using them to estimate educational production functions and educational attainment functions, and linking these functions with the earnings function in a recursive framework, we can also assess the various indirect effects on earnings of ability and years of schooling. Having data sets from two countries very similar with respect to size, resource endowments, structure of production and employment, and level of development means that not only can we subject our results to the usual statistical tests, but we can also assess their replicability. Both Kenya and Tanzania have nearly achieved the objective of universal primary education while university enrollments remain at less than 1 percent of the relevant age group. The important policy issues re* Boissiere: Development Research Department, The World Bank, 1818 H Street, Washington, D.C. 20433; Knight: Institute of Economics and Statistics, Oxford University; Sabot: Williams College, Williamstown, MA 01267. We are grateful to the Educational Testing Service of Princeton for the design of tests used in this study and to J. Armitage, J. Behrman, J. Hausman, D. Hendry, D. Jamison, and an anonymous referee for their insights and advice. Helpful comments were also received from participants in seminars at Oxford and Yale universities. The views presented here are our own; they should not be interpreted as reflecting those of the World Bank. 'George Psacharopoulos (1973; 1981) contains a listing of 44 countries in which rate of return studies had been conducted and of the estimates obtained. 2For instance, Kenneth Arrow (1973), Mark Blaug (1976), Samuel Bowles and Herbert Gintis (1976), John Riley (1979), Michael Spence (1976), and Lester Thurow (1975). 3For attempts to control for ability and/or for cognitive achievement in studies for the United States, see Jere Behrman et al. (1980), Gary Chamberlain and Zvi Griliches (1977), Griliches and William Mason (1972), Michael Olneck (1977), Paul Taubman and Terence Wales (1974), Taubman (1975), and David Wise (1975); see also the survey articles by Griliches (1977; 1979). In most instances the data refer to special subgroups in the population and clear distinction cannot be made between natural ability and cognitive skills acquired in school-

A Test of Dual Labor Market Theory

Abstract: Despite substantial differences in their views of the appropriate policy response to the existence of poverty, neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis.This paper presents a test of the two central propositions of dual market theory -- 1) the existence of two distinct labor markets with different wage setting mechanisms and 2) the existence of barriers to mobility between the labor markets. We find considerable support for both hypothesis. Estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations. The one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience. The other equation is flat with no returns to human capital. These two equations resemble the predictions of dual market theory for the "primary" and "secondary" markets respectively. Further, we present evidence that(at least) some non-white workers are involuntarily confined to the secondary market. This crowding of minority workers into the low wage labor market accounts for a substantial portion of white/non-white wage differences. We interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels. In addition, combining the efficiency wage argument with the observation that much of the white/non-white wage difference is explained by the exclusion of non-whites from the primary sector suggests an explanation for the persistance of wage differences.

Education and the Distribution of Earnings: The Maintenance of the status Quo

Abstract: Research in the field of human capital theory in the last one decade or so have hardly left any scholar in the field skeptical about the existence of a positive relationship between education and income. But there is no doubt that many of the researchers, including some of the proponents of the orthodox school (for example Blaug, 1976) are skeptical about the explanation given by human capital theorists, why these two variables viz., education and income, go together.

Occupational change, employer change, and the transferability of skills

Abstract: The individual propensity to change occupations has been little analyzed by economists, despite its important implications for income growth and market adjustment. Individual income growth is commonly associated with one form of occupational change, that of upward occupational mobility. Several examples of upward mobility sequences are: technician to engineer to manager; receptionist to secretary to administrative assistant; laborer to operative to craft worker. Changes in these directions are likely to be accompanied by income growth, and conversely, downward occupational mobility would decrease income. The implicit cause of the income growth associated with upward mobility is the increase in the individual's skills and the return to those skills. In other words, each of the sequences listed above appears to represent a discontinuous sequence of investments in occupational skills. The resulting life cycle profile of investment and income growth is discontinuous and concave. Similar life cycle profiles would characterize an individual's change of employer or region. Yet, these latter two types of mobility have received much more attention by economists than has occupational change.' This paper attempts to address this gap, by developing a human capital investment model describing the direction and timing of occupational change. To place the research described below in perspective, one must first ask why there has been so little analysis of occupational change. Sociologists have long been interested in occupational mobility, analyzing it as a means of upward income mobility. Yet economists have focused on models of occupational choice, disregarding occupational change over the life cycle [4; 15]. These models of occupational choice rely most heavily on the effects of formal schooling, thus disregarding the majority of the labor force for whom formal schooling is not a major determinant of either occupational choice or subsequent occupational change. Two factors may have contributed to the lack of interest in occupational change. First, the analysis of occupational change has relatively little direct policy relevance, as compared to the analysis of labor institutions, for example. Occupational change was last examined in

Internal migration and urban employment in the third world

Abstract: For more than a decade Michael Todaros model has provided a widely accepted theoretical framework for explaining the massive flows of rural urban migration that are observed in many Third World countries. This paper however presents data amassed from a wide range of countries to highlight a crucial shortcoming of that model. It will be shown that far from being general in nature the Todaro approach is limited to explaining the movement of persons possessed of sufficient human capital to qualify them for modern sector employment....The present work utilizes the perspective of the urban subsistence sector to develop a model that serves as a useful complement to that of Todaro. (EXCERPT)

Entrepreneur Human Capital Endowments and Minority Business Viability.

Abstract: This study analyzes the relationship between entrepreneur human capital endowments and minority enterprise profitability. The better educated subset of entrepreneurs earns high profits relative to their minority business counterparts, and the lines of business in which they are concentrating lie outside the retail and personal service areas that have traditionally dominated minority business activity. In addition to fostering industrial diversity by creating and expanding firms in heavy construction, manufacturing, and skill-intensive services, the better educated entrepreneur group is found to be utilizing effectively both its financial and human capital inputs.

Life on the frontier: migrant information earnings and past mobility

Abstract: This paper examines the extent to which information obtained from past geographic mobility affects both post-move job-search and earnings in subsequent migration [in the United States]. The study considers this linkage between past and present mobility by estimating earnings frontiers for various categories of interstate migrants partitioned by prior mobility history....[The] results demonstrate that migrant groups exhibiting high relative levels of human capital stock do not necessarily possess superior pre-move labor market information. It is also demonstrated that the incentive to acquire this pre-move information is tied to psychic cost and variation in this cost among migrant types. (EXCERPT)

Sex Differences in Earnings: The Influence of Industrial Sector, Authority Hierarchy, and Human Capital Variables.

Abstract: Industrial sectors and authority hierarchies are examined as an explanation for women's lower earnings compared with men's. Sectoral location and authority position are found to have independent additive effects on earnings; these effects, however, differ by sex. Women are more likely to achieve higher authority positions within the peripheral sector, and men occupy similar authority positions across sectors. Men receive slightly higher benefits from being in the core sector, and although industrial sector and authority position do not interact for either women or men, men receive greater benefits from high authority positions than do women. The additional control for human capital variables did not reduce substantially the female-male earnings gap, but we did find that the human capital variables operate differently for women and men over industrial sectors. Whereas core and periphery men seem to be similarly advantaged and disadvantaged by various human capital variables, these variables are substantial...

Human Capital, Adjustments in Subjective Probabilities, and the Demand for Pest Controls

Abstract: In addition to risk aversion, farmer behavior in an uncertain environment is governed by subjective probability estimates of random events. The estimates given here lend support to the idea that human capital development can improve farmers' ability to estimate pest damage probabilities. More accurate assessment of subjective probabilities leads to lower pesticide use and increases the use of labor-intensive pest controls. The human capital variables with the largest effects are formal schooling and farmer experience, with smaller impacts from field scouting and extension schools.

Migration and wage growth: a human capital approach

Abstract: The purpose of this paper is to analyze migration as an investment in human capital using panel data. [The authors] focus on two issues. The first is the economic motivation for migration and the reasons some movers receive high returns relative to other migrants. The second issue and the major focus of the paper is a test of the human capital model explaining wage profiles of nonmovers first-time and repeat migrants. The data are from the National Longitudinal Survey of Young Males 1966-1971 cross-section and concern the United States. (EXCERPT)

Occupation Segregation: A Defense of Human Capital Predictions

Abstract: This article examines worker sorting across occupations in response to the risk of death on the job. We use family structure as a proxy for willingness to trade safety for wages to test the proposition that workers with strong aversion to this risk sort ...

Rates of returns to education and the determinants of earnings in Pakistan.

Abstract: This paper is a straightforward exercise in estimating earnings functions and computing the private rates of returns to different levels of education. The latter summarizes the incentives to the individual to invest in human capital formation, while the former helps in ascertaining the influence of both human and non human capital variables on the earnings of the individual. A few studies conducted in the past found the rates of returns to education in Pakistan not in conformity with those of the majority of the developing countries for which such estimates exist. The estimated rates were lower for all levels of education in Pakistan than in the developing world. Moreover, the computed rates of returns had a positive association with the level of education.

How Do Public Sector Wages and Employment Respond to Economic Conditions

Abstract: This paper examines the changes over time in public sector wages and employment relative to private sector wages and employment using data from surveys of establishments and individuals. The paper finds that:(1) The pay of public sector workers relative to private sector workers varies greatly over time. Contrary to the view that public sector payis inflexible, variations in relative pay are due as much to fluctuations in public pay as to fluctuations in private pay.(2) The relatively high paid public sector worker of the early 1970s has within the span of a decade lost much of his or her advantage over otherwise comparable private sector workers, seriously denting if not destroying the picture of the 'overpaid' public employee which developed in the early 1970s.The group of public sector workers who tend to be most highly paid in the U.S. relative to private sector workers are blacks and women, suggesting that the public sector discriminates less than does the private sector.(3) Differentials in public and private sector pay vary greatly depending on the nature of comparisons, with for example Current Populations Survey comparisons of individuals with similar broad human capital showing federal employees to be higher paid than private employees and Bureau of Labor Statistics surveys of wage rates in particular occupations showing federal workers to be lower paid.(4) Public sector employment follows a very different pattern of change than private sector employment. It has smaller annual variation, and moves counter cyclically rather than cyclically. In terms of demographic composition the public sector employs relatively more blacks and women than the private sector.

Executive Compensation: Female Executives and Networking

Abstract: The phrase "it's who you know, not what you know, that counts" is often heard in conversations about people who get ahead. In economic terms, this phrase translates into " it's your connections, not your human capital investments, that count." This study attempts to determine the influence of networking in addition to human capital investments by examining a sample of top female executives in the United States. We conclude that networking is as important as performance variables in helping women climb the corporate ladder.

Unequal Organizations or Unequal Attainments? An Empirical Comparison of Sectoral and Individualistic Explanations for Aggregate Inequality

Abstract: Explanations derived from the sectoral perspective in sociology and the humancapital-screening perspectives in economics are used to predict income inequality in the American states. The sectoral perspective is represented by an indicator of the dispersion of concentration in product markets across manufacturing establishments within each state and by the dispersion of employment across enterprises in eight size categories. Individualistic explanations favored by neoclassical economists are operationalized with the dispersion in educational attainments and by the dispersion in the age-experience of the labor force. With the percentage of blacks and three additional variables in the equations, four hypotheses receive consistent support. The strongest determinant of income inequality is the dispersion in educational attainments, but the indicator of concentration is significant in all equations. States with more blacks and greater variance in establishment size also were likely to be comparatively unequal. These results are consistent with both the individualistic emphasis in the neoclassical perspective and the emphasis on economic power in the sectoral perspective. They also indicate that studies of income inequality by human capital economists may have been biased by a failure to control for the institutional variables that are emphasized in sectoral theories.

On Employer-Specific Information and Internal Labor Markets

Abstract: The human capital literature, of which Becker's [2] paper is the seminal work, stresses the productivity enhancing effects of schooling and on-the-job training. Later work by Spence [21] and others emphasizes the fact that it is difficult for employers to ascertain the productivity of potential employees and suggests that activities such as schooling may provide employers with "signals" as to workers' productivities. In the signalling literature, it is assumed that information generated concerning an individual's abilities is general in that it is known to all potential employers. Yet the information that an employer gathers concerning his workers' abilities is not likely to be completely transferable to other employers. As a consequence, as Rosen [18,249] points out, there are "limitations on the ability of the price system ... to achieve efficient assignments. If the price system is incomplete there is a role for entrepreneurial activity of assembling an optimal work force." This paper analyzes the employment relations that arise when employers' information concerning new workers' abilities is incomplete until after a period of employment. The acquisition of such employer-specific information is shown to lead to what has been referred to in the literature as "internal labor markets". Internal labor markets, as identified by Dunlop [5,32], are "the complex of rules which determine the movement of workers among job classifications within administrative units ... these movements may be transfers, promotions, demotions, or layoffs to the exterior labor markets." Doeringer and Piore [3] emphasize "skill specificity" and on-the-job training as the key factors in the emergence of the internal labor market. Along similar lines, Williamson, Wachter, and Harris [22] point out that "job idiosyncracy" can result in employment relations with attributes like those of internal labor markets. By way of contrast, this paper emphasizes the role of employer-specific information in generating internal labor markets. The theory provides an explanation as to why employers dismiss current employees at the same time that new employees are hired. (Evidence that dismissal rates are not insignificant is presented in section IV.) The theory also provides a new rationale for long-term em-

Monetary Returns to Bachelors and Masters Degrees in Agricultural Economics

Abstract: Characteristics of agricultural economics alumni from the University of Georgia were discussed and a general linear model was developed to explain differences in bachelors and masters alumni salaries. Graduate education, work experience, resource mobility, gender, family background, and high school size were found to influence alumni salaries. Returns to a masters degree were computed along with capital recovery periods. Assistantship levels, cost of borrowed and human capital, and nonmonetary benefits were relevant in decisions to attend graduate school. Some costs and benefits of graduate education were found to be subjective, to vary across individuals, and to be influenced by prevailing economic conditions.

Human Capital, Adaptive Ability, and the Distributional Implications of Agricultural Policy

Abstract: The ability to adapt efficiently to an economic environment that has been altered in a specific way may be a scarce resource in agriculture (Schultz)1 The setting that I wish to focus upon is one in which farmers face uncertainty about the future course of events-production, technologies, prices, and governmental policies-and production is dynamic A large share of inputs is purchased from the nonfarm sector, and a significant share of output is exported Information is available on past realizations of events Storing and analyzing information is costly; consequently, farmers are not assumed to have complete information Farmers are assumed to differ in their adaptive ability, which is viewed as a form of human capital, and to employ efficiently the information that they acquire The thesis of this paper is that adaptive ability is unimportant when the processes generating the variables, which farmers take as exogenous, are stationary and unaltered However, when these processes undergo structural change, adaptive ability is expected to affect the quality of production, marketing, and investment decisions Farmers who have superior adaptive skills are expected on average to make better decisions Furthermore, given the highly competitive nature of US agriculture, successfully adapting to structural change is selective Farmers possessing poor adaptive skill can be expected to comprise a relatively large share of the persons forced by economic circumstances to seek alternative employment or retirement, provided governmental intervention does not neutralize this selection process When farmers make production, marketing, and investment plans, their decision rules can be expected to incorporate the anticipated values of uncertain variables that are exogeous to their choices The unanticipated components of these exogenous variables, however, may confuse them and reduce the efficiency of otherwise good plans2 When shocks occur because of domestic or foreign macroeconomic policy, US agriculture is saddled with transmitting business-cycle disturbances

Human Capital and Earnings Distribution in a Developing Country: The Case of Prerevolutionary Nicaragua

Abstract: This article examines how different patterns of human capital investments affect household earning and its major components in rural and urban areas of developing countries. 1865 women aged 15-45 in the following 3 areas of prerevolutionary Nicaragua supply data: the central metropolis; other urban areas; and rural areas. Other urban area households have the highest average total income central metropolis households have the next highest and rural areas have the lowest. Urbanization is positively associated with both mean level of total earnings and with total income. The authors examine 5 human capital variables: womens schooling mens schooling womens health mens health and average household nutrition. Another variable cumulative work experience became apparent during modeling. For women schooling increases labor force participation probability in urban (but not rural) areas nutrition has a positive impact in all 3 regions and past work experience has a significant impact; health status has no effect. Standard human capital variables do not differ significantly between the central metropolis and other areas but sharply contrast between urban and rural areas. For men there is less potential for increasing labor force participation through human capital investment although past work experience schooling and nutrition show significant effects. The authors test 10 simulations of hypothetical changes in human capital distributions which involve increasing education improving nutritional status and improving health. 4 conclusions are drawn: 1) since changes from human capital variables on regional earnings distributions cannot be discerned from individual relations simulation is a useful tool for investigation; 2) estimates of the gains toward distributional goals are needed compared to other investments; 3) directing policies toward the target group is more cost effective than general measures; and 4) policies should be targeted for households low in the overall distribution not just the poorest households.

Government participation in the local economy and race- and sex-based earnings inequality*

Abstract: Recent studies of the effects of the structure of local labor markets on individual earnings have failed to consider how earnings are affected by government participation in local labor and product markets. This study merges SMSA-specific data (including measures of government participation in the local economy) Into the Panel Study of Income Dynamics and regresses individual (log) earnings within race and sex groups on human capital, structural, and local labor market variables. I find that black women have higher earnings in metropolitan areas with greater government employment. Both black men and women receive higher earnings in areas where a large proportion of industrial output is consumed by the public sector. The earnings of white men are mainly predicted by human capital variables, while white women's earnings are most strongly affected by total hours worked. Race and Sex differences in earnings have been a fundamental concern of economists and sociologists for well over three decades. Within this time span, however, the dominant theoretical perspective on earnings and status attainment processes has shifted. In the mid sixties the human capital approach enjoyed great popularity in labor economics. This theory holds that people are paid according to the quantity and quality of the skills they bring to the market. Formal schooling and a long, continuous record of labor force experience are two critical factors in determining a person's wage (Mincer, 1974; Thurow, 1969). While the emphasis in sociology was on explaining a person's socioeconomic status, the approach was similar. Individual characteristics such as educational attainment and family socioeconomic background governed the allocation of individuals into occupational roles from which they derived status (Blau and Duncan, 1967). When the wider U.S. society became concerned with earnings inequality in the mid sixties, academics employed human capital theory to explain the existence of race and sex earnings disparities. Policy-makers designed programs based on the empirical work within the human capital perspective to eliminate such inequality. For example, research showed that the lower earnings of blacks are due in part to the fact that their level of schooling is lower than that of white men (Thurow, 1969). Based on this research, programs were designed to keep blacks in school and to upgrade the skills that they brought to the market in order to bring about earnings parity with white men (Aaron, 1978:Chapter 3)'