the impact of body weight on occupational mobility and career development this paper examines the relationship between individuals weight and their employment decisions over the life cycle i estimate a dynamic stochastic model of individuals annual joint decisions of occupation hours worked and schooling the model allows body weight to affect non monetary costs switching costs and distribution of wages for each occupation and also allows individuals employment decisions to affect body weight i use conditional density estimation to formulate the distributions of wages and body weight evolution i find that heavier individuals face higher switching costs when transitioning into white collar occupations earn lower returns to experience in white collar occupations and earn lower wages in socially intensive jobs simulating the model with estimated parameters decreased occupational mobility accounts for 10 percent of the obesity wage gap while contemporaneous wage penalties for body weight are small the cost over the life cycle is substantial an exogenous increase in initial body mass by 20 percent leads to a 10 percent decrease in wages over the life course

micro data heterogeneity and the evaluation of public policy nobel lecture this paper summarizes the contributions of microeconometrics to economic knowledge four main themes are developed 1 microeconometricians developed new tools to respond to econometric problems raised by the analysis of the new sources of micro data produced after the second world war 2 microeconometrics improved on aggregate time series methods by building models that linked economic models for individuals to data on individual behavior 3 an important empirical regularity detected by the field is the diversity and heterogeneity of behavior this heterogeneity has profound consequences for economic theory and for econometric practice 4 microeconometrics has contributed substantially to the scientific evaluation of public policy

evolution of gender differences in post secondary human capital investments college majors although women in the united states now complete more college degrees than men the distribution of college majors among college graduates remains unequal with women about two thirds as likely as men to major in business or science we develop and estimate a dynamic overlapping generations model of human capital investments and labor supply we allow for specific college major choices instead of aggregating these choices to the education level results show that changes in skill prices higher schooling costs and gender specific changes in home value were each important to the long term trends abstract from author

assessing policies to equalize opportunity using an equilibrium model of educational and occupational choices abstract the inter generational correlation of education in the u s is tremendous for instance in psid data from 1990 young males with college educated parents had a 70 chance of attending college but those with high school drop out parents had only a 15 chance in this paper we analyze the impact of college attendance bonus schemes designed to increase college attendance rates and pv of lifetime income of youth from disadvantaged backgrounds of course policies that increase the supply of skilled labor may reduce the college wage premium see heckman et al heckman james lochner lance and taber christopher explaining rising wage inequality explorations with a dynamic equilibrium model of labor earnings with heterogeneous agents review of economic dynamics 1 1998a 1 58 heckman james lochner lance and taber christopher general equilibrium treatment effects a study of tuition policy american economic review 88 2 1998b 381 386 this may have the unintended consequence of wiping out most of the gains to the targeted groups the strength of such equilibrium effects on wages depends on the substitutability between different types of labor thus it is important to evaluate education subsidies within an equilibrium framework that allows for flexible patterns of substitution across factor inputs this is exactly what we do here using an overlapping generations equilibrium model of the u s labor market fit to psid data from 1968 to 1996 the model allows for imperfect substitution among types of labor differentiated by education gender age and ten 1 digit level occupations a much finer differentiation than has been considered in prior work we find that very large college attendance bonuses are necessary to equate college attendance rates between youth whose parents had only high school degrees or were high school dropouts and youth whose parents attended at least some college the size of these bonuses far exceeds any reasonable measure of college costs suggesting the costs the bonuses overcome are primarily psychic or effort costs for example youth from disadvantaged backgrounds may be poorly prepared for college this suggests that bonuses targeted at college age youth are probably a very inefficient way to reduce inequality earlier intervention is likely called for

choosing the field of study in postsecondary education do expected earnings matter abstract this paper examines the determinants of the choice of the college major when the length of studies and future earnings are uncertain we estimate a three stage schooling decision model focusing on the effect of expected earnings on major choice we control for dynamic selection through the use of mixture distributions exploiting variations across the french business cycle in the relative returns to the majors our results yield a very low though significant elasticity of major choice to expected earnings this suggests that at least for the french university context nonpecuniary factors are a key determinant of schooling choices

education and crime over the life cycle we compare two large scale policy interventions aimed at reducing crime subsidizing high school completion and increasing the length of prison sentences to this purpose we use a life cycle model with endogenous education and crime choices we apply the model to property crime and calibrate it to u s data we find that targeting crime reductions through increases in high school graduation rates entails large efficiency and welfare gains these gains are absent if the same crime reduction is achieved by increasing the length of sentences we also find that general equilibrium effects explain roughly one half of the reduction in crime from subsidizing high school

the return to schooling in structural dynamic models a survey this papers contains a survey of the recent literature devoted to the returns to schooling within a dynamic structural framework i present a historical perspective on the evolution of the literature from early static models set in a selectivity framework willis and rosen 1979 to the recent literature stimulated by keane and wolpin 1997 and which uses stochastic dynamic programming techniques after reviewing the literature thoroughly i compare the structural approach with the iv experimental approach i present their commonalities and i also discuss their fundamental di8erences to get an order of magnitude most structural estimates reported for the us range between 4 and 7 per year on the other hand iv estimates between 10 and 15 per year are often reported the discrepancy prevails even when comparable if not identical data sets are used the discussion is focussed on understanding this divergence the distinction between static and dynamic model specifications is a recurrent theme in the analysis i argue that the distinction between the iv approach and the structural approach may be coined in terms of a trade o8 between behavioral and statistical assumptions for this reason and unless one has very specific knowledge of the true data generating process it is neither possible nor sensible to claim which approach to estimation is more flexible more precisely i show that structural and iv approaches differ mainly at the level of i the compatibility of the underlying models with truly dynamic behavior ii the role of heterogeneity in ability and tastes iii the consideration of post schooling opportunities and iv the specification and interpretation of the mincer wage equation

does wealth explain black white differences in early employment careers in this article i inquire about the effects initial wealth has on black white differences in early employment careers i set up a dynamic model in which individuals simultaneously search for a job and accumulate wealth and fit it to data from the national longitudinal survey 1979 cohort regime changes and decompositions of racial differences reveal that differences in the labor market environment and in preferences account fully for racial gaps in wealth and in wages persisting several years after high school graduation differences in initial wealth partially explain differences in early employment careers

education policy and intergenerational transfers in equilibrium this paper compares partial and general equilibrium effects of alternative financial aid policies intended to promote college participation we build an overlapping generations life cycle heterogeneous agent incomplete markets model with education labor supply and consumption saving decisions altruistic parents make inter vivos transfers to their children labor supply during college government grants and loans as well as private loans complement parental transfers as sources of funding for college education we find that the current financial aid system in the u s improves welfare and removing it would reduce gdp by two percentage points in the long run any further relaxation of government sponsored loan limits would have no salient effects the short run partial equilibrium effects of expanding tuition grants especially their need based component are sizeable however long run general equilibrium effects are 3 4 times smaller every additional dollar of government grants crowds out 20 30 cents of parental transfers

a dynamic analysis of educational attainment occupational choices and job search this article examines career choices using a dynamic structural model that nests a job search model within a human capital model of occupational and educational choices wage growth occurs in the model because workers move between firms and occupations as they search for suitable job matches and because workers endogenously accumulate firm and occupation specific human capital simulations performed using the estimated model reveal that both self selection in occupational choices and mobility between firms account for a much larger share of total earnings and utility than the combined effects of firm and occupation specific human capital

labor supply and taxes a survey i survey the male and female labor supply literatures focusing on implications for effects of wages and taxes for males i describe and contrast results from three basic types of model static models especially those that account for nonlinear taxes life cycle models with savings and life cycle models with both savings and human capital for women more important distinctions are whether models include fixed costs of work and whether they treat demographics like fertility and marriage and human capital as exogenous or endogenous the literature is characterized by considerable controversy over the responsiveness of labor supply to changes in wages and taxes at least for males it is fair to say that most economists believe labor supply elasticities are small but a sizeable minority of studies that i examine obtain large values hence there is no clear consensus on this point in fact a simple average of hicks elasticities across all the studies i examine is 0 30 several simulation studies have shown that such a value is large enough to generate large welfare costs of income taxation for males i conclude that two factors drive many of the differences in results across studies one factor is use of direct vs ratio wage measures with studies that use the former tending to find larger elasticties another factor is the failure of most studies to account for human capital returns to work experience i argue that this may lead to downward bias in elasticity estimates in a model that includes human capital i show how even modest elasticities as conventionally measured can be consistent with large welfare costs of taxation

higher education funding reforms in england the distributional effects and the shifting balance of costs this paper undertakes a quantitative analysis of substantial reforms to the system of higher education he finance first announced in 2004 and then revised again in july 2007 the reforms introduced deferred fees for he payable by graduates through the tax system in the form of income contingent repayments on loans subsidised by the government lifetime earnings that have been simulated by the authors using innovative methods are used to analyse the likely distributional consequences of the reforms for graduates it is shown that graduates with low lifetime earnings will pay less for their he than graduates higher up the lifetime earnings distribution compared to the system operating before the reforms taxpayers will bear substantial costs due to the interest rate and debt write off subsidies the extent to which the reforms are likely to shift the balance of funding for he between the public and private sector is also analysed as well as the likely distributional consequences of a number of variations to the system such as removing the interest subsidy from the loans

international tax coordination regionalism versus globalism tax competition for mobile capital can undermine the attempts of governments to redistribute income from rich to poor i study whether international tax coordination can alleviate this problem using a general equilibrium model synthesizing recent contributions to the tax competition literature the model highlights the crucial distinction between global tax coordination and regional coordination with high capital mobility between the tax union and the rest of the world the welfare gain from regional capital income tax coordination is only a small fraction of the gain from global coordination even if the tax union is large relative to the world economy

labour market effects of international trade when mobility is costly i build and estimate a dynamic structural model of sectoral choices with heterogeneous workers accumulating imperfectly transferable human capital utility costs provide an additional barrier to mobility estimated by simulated minimum distance on administrative data covering the population of danish workers costs are found to be in the range of 10 to 19 of average annual wages removing permanent unobserved heterogeneity increases the utility costs by an order of magnitude i show that both the imperfect transferability of human capital and the utility costs are important in explaining the slow adjustment of the labour market following shocks to the economy this article is protected by copyright all rights reserved

the case for international tax co ordination reconsidered tax co ordination its desirability and redistributional implication in a world of high capital mobility governments may be tempted to undercut each other s capital income taxes to attract capital from abroad since such tax competition may have detrimental effects for all countries european policy makers have debated the introduction of a minimum capital income tax rate within the eu this paper develops an applied general equilibrium model to estimate the effects of such tax co ordination on resource allocation income distribution and social welfare the model allows for the concern of policy makers that a rise in capital taxes within the eu may cause a capital flight out of europe capital flight will indeed reduce the welfare gain from tax co ordination within western europe but a positive net gain will remain although it is likely to be well below 1 of gdp the gain from co ordination will be unevenly distributed across european countries due to differences in economic structures and in the social preference for redistribution moreover even if the median voter s gain from tax co ordination may be small the gains for the poorer sections of society may be quite large peter birch sorensen

new panel results on cointegration of international health expenditure and gdp this article tests for existence of cointegration between health expenditure and gdp using data from 25 oecd countries for the period 19607ndash 1997 the empirical modelling is based on a heterogeneous bivariate vector error correction panel model that allows for trending data as well as intercepts and trends in the cointegrating relations univariate country by country and panel unit root tests generally fail to reject the null of a unit root in the health expenditure and gdp variables country by country results based on the johansen multivariate likelihood based inference indicate somewhat mixed results on country specific cointegration with a rank of one found for 12 countries and a rank of zero for the remaining 13 countries application of a new panel test for cointegration rank with higher power than the individual tests indicates that health expenditure and gdp are cointegrated around linear trends

immigration wages and education a labour market equilibrium structural model recent literature analysing wage effects of immigration assumes labour supply is fixed across education experience cells this article departs from this assumption estimating a labour market equilibrium dynamic discrete choice model on u s micro data for 1967 2007 individuals adjust to immigration by changing education participation and or occupation adjustments are heterogeneous 4 2 26 2 of prime aged native males change their careers of them some switch to white collar careers and increase education by about three years others reduce labour market attachment and reduce education also by about three years these adjustments mitigate initial effects on wages and inequality natives that are more similar to immigrants are the most affected on impact but also have a larger margin to adjust and differentiate adjustments also produce a self selection bias in the estimation of wage effects at the lower tail of the distribution which the model corrects

estimating a dynamic spatial equilibrium model to evaluate the welfare implications of regional adjustment processes the decline of the rust belt this article develops and estimates a new dynamic spatial equilibrium model to study the regional transition dynamics and its impact on individual and aggregate welfare the model consists of a multiregion multisector economy comprised of overlapping generations of individuals with heterogeneous skills and mobility costs the empirical findings suggest that a large fraction of the decline of the rust belt can be attributed to the reduction in its region specific comparative advantage in the goods producing sector this decline generated significant differences in welfare across regions policy experiments show that such inequality can be significantly reduced through place based policies

labor supply estimation biases from disregarding nonwage benefits labor supply models and research underpinned by labor supply decisions typically assume the agents choices are functions of wage and wage offers however there is evidence that these selections are not only wage driven but at least in part depend on non wage benefits encompassed in jobs and occupations in this paper i develop and estimate a stochastic dynamic model of occupational and job choice where non wage benefits are directly incorporated into the decision alongside wages a nested model within this is a wage model representing common practice in the literature where non wage benefits are disregarded i separately estimate the full model and the nested wage model in order to compare the implications of omitting non wage benefits three analyses are compared elasticities economy wide structural changes in occupations and inequality reduction intervention policies i find that while disregarding non wage benefits generally causes biases there are cases when the two models predict very similar outcomes and have close estimates such as in occupational specific elasticities and job transition elasticities however i demonstrate that these special cases are products of canceling biases and that the same estimates on subpopulations are biased these results suggest that in most cases ignoring non wage benefits will bias estimates by overestimating the importance of wage in the selection process and so any intervention or change in wages will be over emphasized and by disregarding changes in relative prices between wage and non wage benefits such as happens through changes in wage taxes or in non wage benefits these biases can be severe the results suggest that ignoring non wage benefits in labor supply decisions is appropriate only in the special case in which subpopulation biases negate each other which is atypical i would like to thank moshe buchinsky and maria casanova for their invaluable and continual help in this project as well as rosa matzkin arturo harker seth kerstein dan ben moshe peter bergman anonymous referees at review of economics and statistics and seminar participants at ucla rand syracuse university the bureau of labor statistics and the census bureau for numerous helpful comments and suggestions

women s college decisions how much does marriage matter this article investigates the sequential college attendance decision of young women and quantifies the effect of marriage expectations on their decision to attend and graduate from college a dynamic choice model of college attendance labor supply and marriage is formulated and structurally estimated using panel data from the nlsy79 the model is used to simulate the effects of no marriage benefits and finds that the predicted college enrollment rate will drop from 58 0 to 50 5 using the estimated model the college attendance behavior for a younger cohort from the nlsy97 is predicted and used to validate the behavioral model

an estimable dynamic general equilibrium model of work schooling and occupational choice this paper develops and estimates a dynamic general equilibrium overlapping generations model of career decisions the model is fit to data on life cycle employment schooling and occupation decisions and on life cycle labor earnings within and between cohorts observed in the us between 1968 and 1993 based on the estimates of the model the impact of cohort size on skill prices and consequently on career decisions is assessed compared to a baseline case in which cohort size increased at a steady average rate and the fertility process was stationary it is found that the male baby bust generations born in the 1930s and 1940s faced higher skill prices by as much as 2 0 completed college at a higher rate by as much as 0 3 percentage points and worked more over the lifetime by as much as 0 1 years in contrast the males from the baby boom generations born in the 1950s and 1960s faced lower skill prices by as much as 1 5 completed college at a lower rate by as much as 1 0 percentage points and worked less over the lifetime by as much as 0 1 years the impact of cohort size is found to differ across gender due to the differential impact of fertility on the value of home production unlike males the female baby bust generations completed college at a lower rate by as much as 1 5 percentage points and worked less over the lifetime by as much as 0 5 years while the female baby boom generations completed college at a lower rate by as much as 1 5 percentage points and worked more over the lifetime by as much as 0 2 years a tuition subsidy experiment is also performed both in a general equilibrium setting in which skill prices are endogenous and in a partial equilibrium setting with fixed skill prices based on the estimated model a 1 increase in tuition is predicted to reduce college enrollment rates by 1 27 in partial equilibrium consistent with previous estimates and by 1 05 in the general equilibrium case thus for this policy experiment the partial equilibrium analysis of schooling choice would not differ significantly from the general equilibrium analysis

intersectoral labor mobility and the growth of the service sector one of the most striking changes in the u s economy over the past 50 years has been the growth in the service sector between 1950 and 2000 service sector employment grew from 57 to 75 percent of total employment however over this time the real hourly wage in the service sector grew only slightly faster than in the goods sector in this paper we assess whether or not the essential constancy of the relative wage implies that individuals face small costs of switching sectors and we quantify the relative importance of labor supply and demand factors in the growth of the service sector we specify and estimate a two sector labor market equilibrium model that allows us to address these empirical issues in a unified framework our estimates imply that there are large mobility costs output in both sectors would have been double their current levels if these mobility costs had been zero in addition we find that demand side factors that is technological change and movements in product and capital prices were responsible for the growth of the service sector

labor market search and schooling investment we generalize a search matching and bargaining model to allow individuals to acquire productivity enhancing schooling prior to labor market entry in general search frictions and weakness in bargaining position contribute to underinvestment in schooling from an efficiency perspective using estimates of a general equilibrium version of the model in which firm vacancy creation decisions are included we find that minimum wages and schooling subsidies improve aggregate welfare but have very different welfare impacts across the ability distribution in particular policies that maximize the average welfare of workers have strongly negative effects on the welfare of the least able

human capital prices productivity and growth separate identification of the price and quantity of human capital has important implications for understanding key issues in labor economics and macroeconomics price and quantity series are derived and subjected to robustness checks the human capital price series associated with dierent education levels are highly correlated and exhibit a strong secular trend three result

female labour supply human capital and welfare reform we estimate a dynamic model of employment human capital accumulation including education and savings for women in the united kingdom exploiting tax and benefit reforms and use it to analyze the effects of welfare policy we find substantial elasticities for labor supply and particularly for lone mothers returns to experience which are important in determining the longer term effects of policy increase with education but experience mainly accumulates when in full time employment tax credits are welfare improving in the u k increase lone mother labor supply and marginally reduce educational attainment but the employment effects do not extend beyond the period of eligibility marginal increases in tax credits improve welfare more than equally costly increases in income support or tax cuts

fiscal policy and occupational employment dynamics we document substantial heterogeneity in occupational employment dynamics in response to government spending shocks in the united states employment rises most strongly in service sales and office pink collar occupations by contrast employment in blue collar occupations is hardly affected by fiscal policy we provide evidence that occupation specific changes in labor demand are key for understanding these findings we develop a business cycle model that explains the heterogeneous occupational employment dynamics as a consequence of composition effects due to heterogeneous employment changes across industries and occupation specific within industry employment shifts due to differences in the short run substitutability between labor and capital services across occupations

fostering educational enrolment through subsidies the issue of timing summary the purpose of this paper is to build a dynamic structural model of educational choices in which cognitive skills shape decisions the model is estimated by maximum likelihood using cohort data where individuals are observed from birth to the middle of their working life these data are unique in that they include cognitive skills test scores collected as early as age 7 we then investigate how alternative policies foster educational enrolment in particular we simulate the effect of two subsidies different in the timing of disbursement the first consists of grants assigned directly to individuals aged between 16 and 18 the second is assigned to the parents earlier on when the cohort is still in its childhood the latter subsidy affects cognitive skills accumulation and in turn educational choices our results suggest that a grant fosters enrolment at the lowest cost but the parental income subsidy generates more welfare as measured by a class of social welfare functions nevertheless these differences in costs and welfare are small overall the results reinforce the view that government investments in cognitive skill accumulation during childhood are worthwhile however the results also indicate that such investments should be well structured to ensure a high return copyright 2010 john wiley sons ltd