oligarchy democracy inequality and growth abstract this paper analyses the dynamics of inequality democratization and economic development in a political economy model of growth where education is both the engine of growth and a determinant of political participation in a context with imperfect capital markets we investigate the incentives for an educated oligarchy to subsidize the poor s education and to initiate a democratic transition we characterize the equilibrium patterns of political institutions income distribution and growth as a function of the initial income and inequalities in particular we identify circumstances under which the elite promotes the endogenous emergence of a middle class for purely political economy reasons a simple linear infinite horizon framework is then presented in this setting we discuss the importance of historical dependence for long run social stratification and redistribution

labor market returns to college major specificity abstract this paper develops a new approach to measuring human capital specificity in the context of college majors and estimates its labor market return over a worker s life cycle to measure specificity we propose a novel method grounded in human capital theory a gini coefficient of earnings premia for a major across occupations our measure captures the notion of skill transferability across jobs education and nursing are the most specific majors while philosophy and psychology are among the most general using data from the american community survey we find that the most specific majors typically pay off the most with an early career earnings premium of about 5 6 over average majors 15 20 over the most general majors driven by higher hourly wages general majors lag far behind at every age despite their earnings advantage graduates from specific majors are the least likely to hold managerial positions with graduates from majors of average specificity being the most likely to do so it may be that managerial positions require a mix of specific knowledge and broadly applicable skills

returns to apprenticeship training in austria evidence from failed firms in the german speaking countries little is known about the payoffs to apprenticeship training for the participants ols estimates suggest that the returns are similar to those of other types of schooling however there is considerable heterogeneity in the quality of apprenticeships offered and institutional descriptions suggest that there might be an important element of selection in who obtains an apprenticeship and what type in order to overcome the resulting ability bias we estimate returns to apprenticeship training for apprentices in small austrian firms which cease to operate when a firm fails current apprentices cannot complete their training in this firm since apprentices will be at different stages in their apprenticeship at that time the failure of a firm will manipulate the length of the apprenticeship period completed for some apprentices the time to firm failure can therefore serve as an instrument for the length of the apprenticeship completed both at the original firm and at other firms we find instrumental variables returns which are similar or larger than the ols returns in our sample indicating relatively little selection

the coevolution of economic and political development from monarchy to democracy this article establishes a unified political economy model to analyze the democratization process from monarchy to oligarchy and to democracy in the context of dynamic economic development as the predominant source of wealth evolves from land to physical capital and finally to human capital the relative economic and hence coercive power of land owners capitalists and workers shifts accordingly inducing the transition of the political system where political power is expanded from landlords to capitalists and finally to workers a smooth transition through political compromise facilitates efficient allocation of savings in physical capital followed by efficient investment in human capital

the economics of youth training in germany the german ideal may be termed the long view which must eventually lead the german nation to and maintain it in a foremost place as an industrial world power the british method may be regarded as more philanthropic than patriotic the ideal is admirable but the bulk of the nation s workers are not catered for by this ideal and on the bulk of the workers much of the material prosperity of a nation must depend

the effect of informal care on work and wages cross sectional evidence in the united states finds that informal caregivers have less attachment to the labor force the causal mechanism is unclear do children who work less become informal caregivers or are children who become caregivers working less using longitudinal data from the health and retirement study we identify the relationship between informal care and work in the united states both on the intensive and extensive margins and examine wage effects we control for time invariant individual heterogeneity rule out or control for endogeneity examine effects for men and women separately and analyze heterogeneous effects by task and intensity we find modest decreases 2 4 percentage points in the likelihood of working for male caregivers providing personal care female chore caregivers meanwhile are more likely to be retired for female care providers who remain working we find evidence that they decrease work by 3 10hours per week and face a 3 percent lower wage than non caregivers we find little effect of caregiving on working men s hours or wages these estimates suggest that the opportunity costs to informal care providers are important to consider when making policy recommendations about the design and funding of public long term care programs

horizontal mismatch and vocational education recent literature suggests that vocational education and training vet provides individuals with smoother transitions into the labour market but lower wages over the lifecycle compared to general

occupational sorting of school graduates the role of economic preferences we relate risk attitudes and patience of young graduates from high school college and university measured around the time that they start their labor market career in a large representative survey to the riskiness and timing of earnings in the occupations they choose to work in we find a systematic positive and significant relation between willingness to take risks and measures of occupational earnings risks and employment risk that we derive from a large administrative data set patient individuals are significantly more likely to choose for occupations with a steep earnings profile individuals whose economic preferences are not well aligned with the riskiness and timing of earnings in their initial occupation are more likely to change to an occupation that better matches their economic preferences

who will care employment participation and willingness to supply informal care the impact of informal care responsibilities on the willingness and ability of caregivers to undertake paid employment has been the subject of a number of studies in contrast the effect of employment status on willingness to undertake informal care has been less well explored this paper concentrates on this less studied direction of causality using the data provided by 15 waves of the british household panel survey we find that employment participation and earnings both impact negatively on willingness to supply informal care this evidence has implications for health and social care policy since informal care has been shown to be a significant substitute for formal long term care

education democracy and growth abstract this note presents a model of endogenous growth where redistribution determined by a political equilibrium is in the form of public education it is shown that there need not be a negative relationship between growth and redistribution as public education increases the level of human capital in the conomy and at the same time tends to produce a more even income distribution

why do firms train theory and evidence this paper offers a theory of training whereby workers do not pay for the general training they receive the superior information of the current employer regarding its employees abilities relative to other firms creates ex post monopsony power and encourages this employer to provide and pay for training even if these skills are general the model can lead to multiple equlibria in one equilibrium quits are endogenously high and as a result employers have limited monopsony power and provide little training while in another equilibrium quits are low and training is high using microdata on german apprentices we show that the predictions of our model receive some support from the data

your next of kin or your own career caring and working among the 50 of europe an increasing demand for both formal and informal care is likely to result from the ongoing demographic transition at the same time as there is a further move away from the traditional domestic division of labour public policy making that aims at increasing the supply of informal care necessitates knowledge about the relative importance of various incentives for individual care providers this paper takes as a point of departure that the willingness to supply informal care is partly explained by the extent to which it adversely affects labour market outcomes and analyses the effect on labour market outcomes of providing informal care to one s elderly parent s among the 50 of europe data from share survey of health ageing and retirement in europe was used to examine the association between on the one hand hours of informal care provided and on the other 1 the probability of employment 2 hours worked and 3 wages respectively the results suggest that giving informal care to one s elderly parents is associated with significant costs in terms of foregone labour market opportunities and that these adverse effects vary between countries

do they care too much to work the influence of caregiving intensity on the labour force participation of unpaid caregivers in canada the recent growth of the home care sector combined with societal and demographic changes have given rise to concerns about the adequacy of the supply of family and friend caregivers potential caregivers face competing time pressures that pull them in the direction of the labour market on one hand and towards unpaid caregiving duties on the other this paper examines the influence of unpaid caregiving on the labour supply of a cohort of working aged caregivers in canada with particular emphasis on caregiving intensity results suggest that caregivers are heterogeneous in both their caregiving inputs and associated labour market responses thereby underscoring the importance of controlling for caregiving intensity when measuring labour supply the negative influence of primary caregiving on labour supply appears to be at the level of labour force participation rather than on hours of work or wages

credit ratings and the bis capital adequacy reform agenda abstract in this paper we have revised and updated our earlier study in order to analyze the most recent second draft of the bis s proposed reforms of bank capital requirements we conduct monte carlo experiments using data on defaults and severity rates on publicly traded us corporate bonds over the 1981 1999 period analyzing the whole period and various sub periods it is clear that the most recent draft of the bis proposed reforms seriously overestimates the relative riskiness of high quality debt relative to low quality debt in the so called standardized model as a result the most recent proposal still contains inherent risk shifting taking incentives for banks

the effects of unemployment and underemployment on employment opportunities results from a correspondence audit of the labor market for college graduates the authors use data from a resume audit to estimate the impact of unemployment and underemployment on the employment prospects of recent college graduates they find no statistical evidence linking unemployment spells of different durations to employment opportunities by contrast college graduates who are underemployed have callback rates that are 30 lower than those of applicants who are adequately employed the null effects associated with unemployment and the adverse effects associated with underemployment are robust across cities with relatively tight and loose labor market conditions internship experience obtained while completing one s degree substantially reduces the negative effects of underemployment the data support the proposition that employers view underemployment as a strong signal of lower expected productivity

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded

heterogeneous wage effects of apprenticeship training the relatively small average wage effects of employer and occupation changes after apprenticeship training mask large differences between occupation groups and apprentices with different schooling backgrounds people who change employer and occupation within industrial occupations enjoy large wage advantages whereas apprentices in commerce and trading occupations as well as in construction and crafts occupations face wage losses from an occupation change the differences between the firms that provide the apprenticeship training are found to be small or insignificant in this paper we reconcile the differences between previous findings by comparing and replicating the empirical estimation strategies used this demonstrates that selectivity in occupations and changes unobserved heterogeneity between occupations and sample selection do matter

eldercare hours work hours and perceived filial obligations in this paper we take a fresh look at the magnitude of the trade off between caring informally for a parent and paid work we adopt a simultaneous approach with a primary focus on how hours of car

comments on credit ratings and the bis capital adequacy reform agenda the new basel capital accord basel committee on banking supervision 1999 has the objective of making capital requirements appropriately sensitive to the degree of risk in bank activities this is important because the original capital accord 1998 has been widely criticized for the lack of risk sensitivity of the capital charges assessed against various types of loans many observers believe this has resulted in regulatory arbitrage on the part of banks to the detriment of the quality of the assets banks hold on their books the basel committee has proposed a standardized approach for determining risk based capital using external ratings and two other approaches based on internal models for dealing with credit risk 1 altman et al 2002 examines in detail whether the goal of appropriate risk sensitivity is met by the proposed risk weights of the standardized approach the main conclusion of the altman et al paper and the underlying issues can be seen in fig 1 which plots the proposed risk weights and the historical corporate bond losses by rating as the authors note ratings aaa through a have experienced virtually no defaults but are assigned weights of 20 aaa and aa and 50 a percent more problematic the proposed risk weights for baa and ba rated loans are both 100 even though the loss experience for ba is 10 times higher than for baa finally the b and below rated loans have risk weights only half again as large as baa rated loans while the historical loss experience has been 55 times greater thus the basel proposal fails to capture the relative risks of the various ratings altman et al journal of banking finance 26 2002 923 928

the school to work transition a cross national perspective school to work patterns and issues are discussed for seven economies france germany japan the netherlands sweden the united kingdom and the united states the emphasis is placed on differences across countries in the current labor market position of young people and recent trends therein along with the institutions that regulate youth education training and employment the power of public policies including labor market deregulation labor market programs vocationalization of education and apprenticeship to improve youth outcomes is discussed drawing on national evaluation literatures evidence of extensive policy failure points up the need to develop nationally appropriate institutions to improve school to work transitions

public versus private investment in human capital endogenous growth and income inequality in this paper we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth we use simple functional forms for preferences technologies and income distribution to highlight the distinction between economies with public education and those with private education we find that income inequality declines more quickly under public education on the other hand private education yields greater per capita incomes unless the initial income inequality is sufficiently high we also find that societies will choose public education if a majority of agents have incomes below average

the earnings of informal carers wage differentials and opportunity costs a substantial proportion of working age individuals in britain are looking after sick disabled or elderly people often combining their work and caring responsibilities previous research has shown that informal care is linked with substantial opportunity costs for the individual due to forgone wages as a result of non labour market participation in this paper we show that informal carers exhibit further disadvantages even when participating using the british household panel study bhps we decompose wage differentials and show that carers can expect lower returns for a given set of characteristics with this wage penalty varying along the pay distribution and by gender furthermore opportunity costs from forgone wages and wage penalties are estimated and found to be substantial

the evolution of modern educational systems technical vs general education distributional conflict and growth abstract we study the evolution of an educational system founded on a hierarchical differentiation between vocational and general education with vocational playing an inferior role in the society the dynamics are best summarized by the ratio of the fraction of the population in vocational to that in general education which we interpret as a measure of the degree of stratification of the society we show that this ratio first rises and then declines with the level of development displaying an inverted u shape which reflects the complex interaction between economic and political forces including aggregate income growth wealth inequality and political participation

social status education and growth this paper investigates the implications of social rewards on the allocation of talent in society and consequently on the process of economic growth we consider two sources of heterogeneity among workers nonwage income and innate ability a greater emphasis on status may induce the wrong individuals that is those with low ability and high wealth to acquire schooling causing workers with high ability and low wealth to leave the growth enhancing industries this crowding out effect taken alone discourages growth growth may be enhanced by a more egalitarian distribution of wealth which reduces the demand for status

unequal english wealth since 1670 new data on probated wealth landownership debts and occupations extend our view of the distribution of english wealth back from 1911 to 1670 there were widening gaps in mean wealth between the top landed plus merchant classes and the middle classes across the industrial revolution century size distributions for individual assets also widened so did those for income or total wealth including human but nonhuman net worth did not become more unequal because of important shifts in the land share all inequality measures before 1914 exceeded all those since 1950 the estimates illuminate classical theories of distribution

the contribution of human capital and its policies to per capita income in europe and the oecd abstract this paper studies empirically the effect of education policies on human capital and per capita income the results suggest for european and oecd countries that higher attendance at pre primary education greater autonomy of schools and universities a lower student to teacher ratio higher age of first tracking in secondary education and lower barriers to funding to students in tertiary education all tend to boost human capital through amplifying the positive effects of greater public spending on education benefits from pre primary education are particularly high for countries with an above average share of disadvantaged students school autonomy yields high benefits especially in countries where schools are subject to external accountability from a policy perspective improving the quality of the labour force and value for money of education policies are of utmost importance in the future especially in european countries facing population ageing and ever increasing fiscal constraints prompt policy action is needed given the very long delay with which the full effect of reforms in education policy materialises on human capital and per capita income

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

general education vocational education and labor market outcomes over the life cycle policy proposals promoting vocational education focus on the school to work transition but with technological change gains in youth employment may be offset by less adaptability and diminished employment later in life to test for this tradeoff we employ a difference in differences approach that compares employment rates across different ages for people with general and vocational education using microdata for 11 countries from ials we find strong and robust support for such a tradeoff especially in countries emphasizing apprenticeship programs german microcensus data and austrian administrative data confirm the results for within occupational group analysis and for exogenous variation from plant closures respectively

identifying the hand of past distinguishing state dependence from heterogeneity a basic problem in social science is to ascertain the importance of initial endowments on subsequent outcomes of a dynamic process interest in this topic centers on two distinct issues a do initial endowments have a temporally persistent effect on outcomes i e is there heterogeneity b are the effects of initial endowments attenuated or accentuated by subsequent experiences of the process being studied or by related processes i e is there state dependence these two questions show up in a variety of contexts 1 the importance of family background on a person s subsequent education and earnings is a hotly debated topic do market or nonmarket mechanisms reinforce or diminish initial endowments 2 the incidence of criminal activity is concentrated among a small population of repeated offenders are certain persons prone to criminality or does crime breed crime 3 are persons who experience unemployment more likely to experience future unemployment due to loss of work experience or market stigma 4 does early entry into an industry confer an advantage of incumbency or does it merely proxy the basic managerial and innovative ability of early entrants many formal models of state dependent processes or processes with persistent effects of initial conditions have been formulated invariance of steady states to initial endowments was viewed as a desirable feature of an economic model in the 1960 s and 1970 s path dependent synergism and nonergodicity are fashionable features of models today is the choice between models with long run dependence on initial conditions and those without solely a matter of intellectual esthetics can data discriminate between these two classes of models how many economically extraneous statistical regularity conditions have to be imposed in order to distinguish between these models how many and what kind of maintained assumptions are required in order to let the data speak on these important questions in this paper i focus on one nonergodic model that receives much attention in the literature the model of duration dependence and heterogeneity discussed by herbert silcock 1954 and also examined by tony lancaster 1979 chris elbers and geert ridder 1982 myself and burton singer 1984 and myself and bo honore 1989

school to work linkages educational mismatches and labor market outcomes a recurring question in public and scientific debates is whether occupation specific skills enhance labor market outcomes is it beneficial to have an educational degree that is linked to only one

job security provisions and employment european countries have enacted various job security provisions over the last 30 years employers are required to pay workers on separation or to give advance notice of termination in anything less than a perfectly functioning market there are effects of the provisions on employment incumbents are more likely to retain their jobs but new workers are less likely to be hired an examination of the european data suggests that severance pay requirements reduce employment

an analysis and critique of the bis proposal on capital adequacy and ratings abstract this paper examines two specific aspects of stage 1 of the bank for international settlement s bis s proposed reforms to the 8 risk based capital ratio we argue that relying on traditional agency ratings could produce cyclically lagging rather leading capital requirements resulting in an enhanced rather than reduced degree of instability in the banking and financial system despite this possible shortcoming we believe that sensible risk based weighting of capital requirements is a step in the right direction the current risk based bucketing proposal which is tied to external agency ratings or possibly to internal bank ratings however lacks a sufficient degree of granularity in particular lumping a and bbb investment grade corporate borrowers together with bb and b below investment grade borrowers severely misprices risk within that bucket and calls at a minimum for that bucket to be split into two we examine the default loss experience on corporate bonds for the period 1981 1999 and propose a revised weighting system which more closely resembles the actual loss experience on credit assets

dynamic wage and employment effects of elder parent care this article formulates and estimates a dynamic discrete choice model of elder parent care and work to analyze how caregiving affects a woman s current and future labor force participation and wages the model incorporates parental health changes human capital accumulation and job offer availability the estimates indicate that women face low probabilities of returning to work or increasing work hours after a caregiving spell i use the estimated model to simulate the caregiving employment and welfare effects of a longer unpaid work leave than currently available under the family and medical leave act a paid leave and a caregiver allowance

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

overeducation in the labor market this article examines the reasons for the observed discrepancy between workers actual and required levels of schooling and the resulting differences in returns to schooling overeducated workers are found to be younger and to have lower amounts of on the job training than workers with the required level of schooling they also have higher rates of firm and occupational mobility characterized by movement of higher level occupations the findings suggest that overeducation can be explained by the trade off between schooling and other components of human capital and by the mobility patterns of overeducated workers

credit risk in private debt portfolios default loss severity and average loss rates for a large sample of privately placed bonds are presented and compared with loss experience for publicly issued bonds the chance of very large portfolio losses is estimated and some determinants of such losses are analyzed results show ex ante riskier classes of private debt perform better on average than public debt both diversification and the riskiness of individual portfolio assets influence the bad tail of the portfolio loss distribution private placements are similar to corporate loans in that both are monitored private debt the results are thus relevant to management and securitization of private debt portfolios generally more than half of nonfinancial corporate debt finance is iss ued privately and decisions of the financial intermediaries that invest in such debt depend importantly on its credit risk regulators of such institutions are similarly attentive to portfolio credit risk and it is an important consideration in the design of securitizations of pools of private debt in spite of its importance little is known empirically about private debt credit risk especially ex ante risk as a function of portfolio characteristics many studies have examined the loan portfolio performance of banks thrifts and insurance companies but the ex ante risk characteristics of the portfo

youth unemployment labor market programs and subsequent earnings the effects of unemployment public relief jobs and labor market training on subsequent hourly earnings are examined in a sample of swedish youth earnings equations are estimated using both cross section and panel data methods and biases due to sample selection endogeneity of unemployment and program participation and omitted individual effects are considered the main finding is that one year of unemployment reduces earnings by two percent while the effects of labor market programs are negligible however the negative unemployment effect is eliminated when time invariant individual effects are accounted for copyright 1991 by the editors of the scandinavian journal of economics

higher education subsidies and heterogeneity a dynamic analysis abstract in this paper we develop a simple dynamic general equilibrium framework to address the effects of increasing higher education subsidies in the us from their already substantial levels on inequality welfare and efficiency we focus on three policies the first is a tax and subsidy scheme that ensures that the parental decision to send a child to college is independent of income such a policy decreases the efficiency of the utilization of education resources while the welfare gain is minimal the second policy maximizes the fraction of college educated labor this results in a large drop in the above mentioned efficiency with little or no welfare gain the third is the provision of merit based aid to the poor as opposed to purely need based aid this policy can increase education efficiency with little decrease in welfare based on these experiments we conclude that the case for further increases in higher education subsidies might have been overstated

the highs and lows of the minimum wage effect a time series cross section study of the canadian law we examine the effects of minimum wage legislation in canada over the period 1975 93 for teenagers we find that a 10 increase in the minimum wage is associated with roughly a 2 5 decrease in employment we also find that this result is driven by low frequency variation in the data at high frequencies the elasticity is positive and insignificant the difference in the elasticity across the bandwidth has implications for the interpretation of employment dynamics as a result of minimum wage policy and experimental design in minimum wage studies it also provides a simple reconciliation of the new minimum wage research which reports very small negative or positive elasticities

health and work in the family evidence from spouses cancer diagnoses abstract using canadian administrative data from multiple sources we provide the first nationally representative estimates for the effect of spouses cancer diagnoses on individuals employment and earnings and on family income our identification strategy exploits unexpected health shocks and combines matching with individual fixed effects in a generalized difference in differences framework to control for observable and unobservable heterogeneity while the effect of spousal health shocks on labor supply is theoretically ambiguous we find strong evidence for a decline in employment and earnings of individuals whose spouses are diagnosed with cancer we interpret this result as individuals reducing their labor supply to provide care to their sick spouses and to enjoy joint leisure family income substantially declines after spouses cancer diagnoses suggesting that the financial consequences of such health shocks are considerable

effects of the minimum wage on the employment status of youths an update the large decline in the relative value of the minimum wage during the 1980s makes that period a valuable one for identifying the impact of variation in the minimum wage on youth employment this study produces the robust finding that when the experience of the 1980s is included a 10 percent increase in the minimum wage is estimated to reduce teen employment by less than 1 percent the lower end of the range of previous estimates because this small employment effect is offset by a labor force withdrawal effect the study finds no discernible effect on measured unemployment the study also finds no apparent effect of the minimum wage on the employment of young adults aged 20 24

labor market regulation the diversity of knowledge and skill and national innovation performance abstract the diversity of knowledge and skill is an important element of a national system of innovation we propose a theory of how certain labor market institutions affect diversity and through that route affect levels of innovation specifically unemployment protection up encourages diversity by reducing the risk burden of a broad range of learning or human capital investment for that reason up fosters innovation employment protection ep reduces the risk burden of a much narrower range of learning for this reason it will not enhance diversity to the extent up does and it may actually depress overall diversity and innovation our approach differs from previous research on labor market insurance and skill formation much of which has dealt with a distinction between general and specific skills and which has treated the effects of up and ep as similar estimating the effects of up and ep on patenting for 25 oecd countries over 24 years we find a positive effect from up a negative effect from ep and evidence that the up effect is mediated by diversity of skill

pecuniary emulation inequality and growth abstract we study a two class growth model in which agents care about both consumption and the social perception of their wealth rank the latter determines the social status enjoyed by agents social perceptions are based upon noisy signals of wealth and in equilibrium there is incomplete separation of classes the steady growth rate of the economy increases with the full information status differential between classes and contrary to the growth model without status it is affected by the initial level of wealth inequality both too much equality and too much inequality are detrimental to economic growth

the effectiveness of yts as a manpower policy using data from the 1985 and 1986 scottish people s surveys this paper attempts to measure the effectiveness of the youth training scheme by estimating the impact of youth training scheme participation on both the subsequent probability of employment and the subsequent earnings potential the youth training scheme is found to have a positive impact on the probability of employment after allowing for possible sample selection bias owing to participation being nonrandom there are indications that the youth training scheme may have a positive impact on subsequent wages but the estimates are so imprecise that it was not possible to draw any statistically significant conclusions about wage effects copyright 1990 by the london school of economics and political science

das human kapital a theory of the demise of the class structure this paper suggests that the demise of the capitalists workers class structure was a socio economic transformation orchestrated by the capitalists in reaction to the increasing importance of human capital in sustaining their profit rates physical capital accumulation in the process of industrialization enhanced the importance of human capital in production and generated incentives for capitalists to support the provision of public education for the masses triggering the demise of the existing class structure the implications of the theory are consistent with the voting patterns on england s education reform of 1902

educational expansion skills diffusion and the economic value of credentials and skills examining the economic value of education has been a central research agenda of social scientists for decades however prior research inadequately accounts for the discrepancy between educational

vocational training and gender wages and occupational mobility among young workers this paper investigates the relationship between the gender wage gap the choice of training occupation and occupational mobility we use longitudinal data for young workers with apprenticeship training in west germany workers make occupational career choices early during their careers and women and men pursue very different occupational careers we reconsider whether through occupational segregation women are locked in low wage careers kunze 2005 or whether they can move up to higher wage paths through mobility we furthermore investigate whether patterns have changed across cohorts during the period 1975 and 2001 and whether effects vary across the distribution the main results are first while there exists a persistent gender wage gap over experience the gap has decreased over time second in the lower part of the wage distribution the gap is highest and it increases with experience third occupational mobility is lower for women than for men and the wage gains due to occupational mobility are higher for men than for women especially in the lower part of the wage distribution we conclude that occupational mobility has reduced the gender wage gap but lock in effects are still stronger for women compared to men

the labour market costs of community care this paper reports an empirical investigation into the influence of informal care responsibilities on the labour supply of women the objective is to examine the argument that the uk policy of caring for the chronic sick in the community involves a nontrivial opportunity cost in the form of the forgone labour supply of the informal carers upon which it relies we find that informal carers who care for less than 20 h per week are in fact more likely to participate in the labour market but tend to work for fewer hours per week than otherwise similar noncarers informal carers who care for 20 h or more a week are less likely to participate but only slightly however when they do undertake formal employment they tend to earn less per hour and work for fewer hours per week

education social security and growth abstract we study the role of government s allocation of tax revenues between two outlays public investment in education a transfer to the young generation and social security benefits to the older generation in an overlapping generations economy with pay as you go social security and altruistically motivated transfers from parents to children we analyze how the allocation of the tax revenues between the two outlays affects growth and welfare in competitive equilibria a we obtain comparative dynamics results for nonstationary equilibria subject to a change in the allocation profile b for stationary equilibria we show that for a given allocation profile of the tax revenues educational subsidies can either increase the growth rate or decrease it depending on the parameters of the model preferences production function and the tax rate c if government seeks to allocate funds in a way that maximizes the growth rate we demonstrate that under some plausible conditions it is not optimal to maintain pay as you go social security however if parents preferences combine strong concern for their retirement with significant degree of altruism towards their children then pay as you go social security system does enhance growth and welfare

endogenous determination of public budget allocation across education stages abstract this paper studies the endogenous determination of public budget allocation across hierarchical education stages in less developed economies the top class has dominant political power to implement its most preferred policy which is characterized by exclusive participation and large schooling expenditure at higher education at the expense of basic education in developed economies the budget allocation is more balanced under certain parameters it leads to expanded participation of the middle class in higher education the model offers an explanation to the observed cross country policy difference and is broadly consistent with historical evidence

order from chaos the effects of early labor market experiences on adult labor market outcomes this paper examines the consequences of initial periods of churning or mobility in the labor market to help assess whether faster transitions to stable employment relationships as envisioned by advocates of school to work programs would be likely to lead to better adult labor market outcomes an analysis of national longitudinal survey of youth data for the years 1979 92 yields modest evidence at best linking early job market stability to better labor market outcomes the authors find that for both genders adult labor market outcomes defined as of the late 20s or early to mid 30s are for the most part unrelated to early labor market experiences this evidence does not support efforts to explicitly target the school to work transition insofar as doing so implies changing the structure of youth labor markets so that workers form earlier and firmer attachments to employers industries or occupations

general education versus vocational training evidence from an economy in transition abstract this paper examines the relative benefits of general education and vocational training during romania s transition to a market economy we examine a 1973 educational reform that shifted a large proportion of students from vocational training to general education using census and household survey data we analyze the effect of this policy with a regression discontinuity design we find that men affected by the policy are significantly less likely to work in manual or craft related occupations but have similar levels of labor market participation and earnings compared to their counterparts unaffected by the policy we conclude that differences in labor market returns between graduates of vocational and general schools are largely driven by selection

way station or launching pad unpacking the returns to adult technical education abstract we estimate returns to diplomas and certificates awarded to adult students by public technology centers a niche sector of higher education that elevates occupational and competency based education over transferable credits and traditional degrees technology centers cater to nontraditional students particularly adults seeking part time training in specific skills sub associate credentials arising from tennessee colleges of applied technology increase access to new industries particularly health and industrial mobility explains half of the employment returns to postsecondary diplomas and at least three quarters of the earnings returns to certificates tcat diploma completers earn 707 1034 in additional quarterly earnings over non completers similar to the returns from community college diplomas benefits extend beyond the signal value of completion students who leave without a credential fare significantly better than matched non students with a similar history of earnings

quality of higher education and the labor market in developing countries evidence from an education reform in senegal summary while many studies examine the effect of primary education quality on labor market outcomes in developing countries little is known about the effects at higher levels we exploit the quasi experiment provided by a large scale education reform launched in senegal in 2000 to investigate how quality improvements at the university level affect employment our difference in difference estimates suggest that young high skilled workers experienced a nine percentage point employment gain relative to older workers they are also more likely to have better jobs in the service industry or government suggesting a reduction in the mismatch between the quality of high skilled labor demanded and supplied

the returns to computer use revisited have pencils changed the wage structure too are the large measured wage differentials for on the job computer use a true return to computer skills or do they just reflect that higher wage workers use computers on their jobs we examine this issue with three large cross sectional surveys from germany first we confirm that the estimated wage differential associated with computer use in germany is very similar to the u s differential second we also measure large differentials for on the job use of calculators telephones pens or pencils or for those who work while sitting down we argue that these findings cast some doubt on the literal interpretation of the computer use wage differential as reflecting true returns to computer use or skill

informal care and long term labor market outcomes in this paper we estimate long run effects of informal care provision on female caregivers labor market outcomes up to eight years after care provision we compare a static version where average effects of care provision in a certain year on later labor market outcomes are estimated to a partly dynamic version where the effects of up to three consecutive years of care provision are analyzed our results suggest that there are significant initial negative effects of informal care provision on the probability to work full time the reduction in the probability to work full time by 4 percentage points or 2 4 5 0 if we move from point to partial identification is persistent over time short run effects on hourly wages are zero but we find considerable long run wage penalties

the political economy of long term care we build a two dimensional political economy model to explain the provision and financing of long term care and income redistribution voting agents differ in need and income opening up two conflicts one sets families with disabled parents who are in favor of a public long term care program against the ones without such parents who oppose public financing the other sets the poor against the rich with the former preferring heavier income taxation than the latter we show that a structure induced equilibrium always exists and that it is unique if informal care is provided in equilibrium the equilibrium not only explains the negative association of income inequality and long term care financing but also allows predictions about how demographic change might impact long term care arrangements and expenses

heterogeneity stratification and growth macroeconomic implications of community structure and school finance this paper examines how socioeconomic stratification and alternative systems of education finance affect inequality and growth agents interact through local public goods or externalities school funding neighborhood effects and economywide linkages complementary skills knowledge spillovers sorting families into homogeneous communities often minimizes the costs of existing heterogeneity but mixing reduces heterogeneity faster integration therefore tends to slow down growth in the short run yet raise it in the long run a move to state funding of education presents society with a similar intertemporal trade off local and global complementarities play major roles in determining the efficient social and educational structures copyright 1996 by american economic association

us europe differences in technology driven growth quantifying the role of education abstract european economic growth has been weak compared to the us since the 1980s in previous work krueger and kumar 2003 nber working paper no 9410 we argued that the european focus on specialized vocational education might have been effective during the 1960s and 1970s but resulted in a growth gap relative to the us during the subsequent information age when new technologies emerged more rapidly in this paper we extend our framework to assess the quantitative importance of education policy when compared to labor market rigidity and product market regulation other policy differences more commonly suggested to be responsible for us europe differences a decomposition exercise using a calibrated version of our model assigns a major role to education policy in explaining us europe growth differences

why did universities precede primary schools a political economy model of educational change universities were rst established in europe around the twelfth century while primary schools did not appear until the nineteenth this paper accounts for this phenomenon using a political economy model of educational change on who are educated the elite or the masses and what is taught general or speci c vocational education a key assumption is that

the effect of the expansion of the voting franchise on the size of government this paper examines the claim that expansion of the voting franchise has been an important factor in the growth of government state government spending and state and local spending are explained using a panel of 46 states for 1950 88 elimination of poll taxes and literacy tests led to higher turnout particularly among the poor and a poorer pivotal voter as predicted we find that these changes a fall in the income of voters relative to state income and the ouster of republicans from state government led to a sharp rise in welfare spending but no change in other spending

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

the pre programme earnings dip and the determinants of participation in a social programme implications for simple programme evaluation strategies the key to estimating the impact of a programme is constructing the counterfactual outcome representing what would have happened in its absence this problem becomes more complicated when agents such as individuals firms or local governments self select into the programme rather than being exogenously assigned to it this paper uses data from a major social experiment to identify what would have happened to the earnings of self selected participants in a job training programme had they not participated in it we investigate the implications of these earnings patterns for the validity of widely used before after and difference in differences estimators

the effects of the minimum wage on the employment and earnings of youth the employment and earnings effects of the minimum wage are estimated by parameterizing a hypothesized relationship between underlying market employment and wage relationships versus observed wage

the impact of youth unemployment on adult unemployment in the ncds using the national child development survey this paper looks at cumulated experience of unemployment highlighting how unemployment experience is concentrated on a minority of the workforce over extended periods low educational attainment ability not captured by education financial deprivation and behavioural problems in childhood raise a person s susceptibility to unemployment there is strong evidence of structural dependence induced by early unemployment experience for men but only minor persistence for women attacking low educational achievement and preventing the build up of substantial periods in unemployment as youths may reduce the extent to which a minority of men spend a large part of their working lives unemployed

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

the opportunity costs of informal care does gender matter in this paper we investigate the costs borne by both male and female carers in terms of their forgone formal employment opportunities traditionally informal care was supplied by women but nowadays women are not only more likely to work but also likely to be significant contributors to family finances for women this implies that the size of any forgone earnings cost of informal care is increasing at the same time population ageing is making for increasing numbers requiring care from a policy perspective it is therefore helpful to consider a less traditional but nevertheless important source of informal care men we find that both male and female carers bear indirect costs in that they are less likely to be in paid work than otherwise similar non carers and when they are in paid work they earn significantly less however we find that the motivation for lower employment participation is not the same for men as it is for women

lifting the burden state care of the elderly and labor supply of adult children we use a reform in the federal funding of care for the elderly in norway to examine the effects of formal care expansion on the labor supply decisions of middle aged children we find a consistent and significant negative impact of formal care expansion on insured work absences for the adult daughters of single elderly parents this effect is particularly strong for daughters with no siblings who are also more likely to exceed earnings thresholds after the reform we find no impacts of the reform on daughters mobility or parental health and no effects on adult sons

the job search behavior of employed youth an employed worker s search strategies include 1 employed not searching 2 employed searching and 3 unemployed searching the last requires that the worker quit to search under plausible assumptions on search costs the optimal algorithm involves a dual reservation wage strategy burdett 1978 the probability of on the job search increases as the current wage decreases relative to the distribution of alternative wages if the wage is sufficiently low the searcher quits to search substituting time for financial outlays estimates based on the national longitudinal survey of youth indicate that these calculations characterize the search strategies of young workers copyright 1991 by mit press

in the right place at the wrong time the role of firms and luck in young workers careers we examine administrative data on young german workers and their employers to study the long term effects of an early career job loss to account for nonrandom sorting of workers into firms with different turnover rates and for selective job mobility we use changes over time in firm and age specific labor demand as an instrument for displacement we find that wage losses of young job losers are initially 15 percent but drop to zero within five years only workers leaving very large establishments suffer persistent losses a comparison of estimators implies that initial sorting negative selection and voluntary job mobility biases ordinary least squares estimates toward finding permanent negative effects of early displacements

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

purchasing power parity revisited evidence from old and new tests for an oecd panel the objective of this article is to study long run purchasing power parity ppp for a panel of 21 organisation for economic co operation and development oecd countries from the end of the bretton woods era by applying a wide range of the econometric techniques available this will allow us to present a comprehensive up to date examination of the empirical validity of ppp covering the weak and strong versions of the hypothesis with individual and panel analysis including the absence or presence of cross dependency the linear or nonlinear behaviour of the real exchange rates and the degree of persistence overall the results provide evidence in favour of ppp

academic admissions standards implications for output distribution and mobility we examine the trade offs implicit in academic admissions standards when students are charged cost based tuition and offered loans that remove liquidity constraints lowering entry requirements while holding graduation requirements fixed increases aggregate output and promotes a more equal distribution of wages but reduces relative income mobility and diminishes the scope for affirmative action lowering admissions standards while raising graduation requirements so that the number of graduates remains constant has little direct effect on output distribution or mobility but again reduces the scope for affirmative action income based affirmative action offers a better trade off between output and relative mobility than income neutral admissions jel d31 h42 i23 i28 j24

credit risk models and agricultural lending credit risk models are developed and used to estimate capital requirements for agricultural lenders under the new basel capital accord the study uses credit value at risk methods to calculate probability of default loss given default and expected and unexpected losses two applied models creditmetrics and moody s kmv are estimated using farm financial data the results show that the necessary capital for agricultural lenders under the new basel accord varies substantially depending on the riskiness and granularity of the portfolio

returns to apprenticeship based on the 2006 canadian census to study the effect of apprenticeships in canada the authors use the 2006 census the first large scale representative canadian data set to include information on apprenticeship certification they find large returns for males with an apprenticeship certification when compared with no degree a high school degree or a trade certificate these returns are almost as high as those to a community college diploma by contrast the returns for females who hold an apprenticeship certification are generally less than the returns to any other educational certification except for no degree for both genders differences in observable characteristics account for little of the overall pay differences between apprentices and the alternative educational pathways and the patterns tend to prevail across the quantiles of the pay distributions and for instrumental variable iv estimates

beyond ses a resource model of political participation this paper develops a resource model of political participation the resources considered are time money and civic skills those communications and organizational capacities that are essential to political activity these skills are not only acquired early in life but developed in the nonpolitical institutional settings of adult life the workplace organizations and churches and synagogues these resources are distributed differentially among groups defined by socioeconomic status a two stage least squares analysis shows these resources have powerful effects on overall political activity thus explaining why socioeconomic status has traditionally been so powerful in predicting participation we disaggregate overall activity into three kinds of acts those that involve giving time those that entail donating money and voting each requires a different configuration of resources resulting in different patterns of stratification across various political acts