country specific preferences and employment rates in europe abstract european countries exhibit significant differences in employment rates of adult males differences in average labor leisure preferences determined by cultural values that vary across countries can be responsible for part of these differences however differences in labor market institutions productivity and skills of the labor force are also crucial factors and likely correlated with preferences in this paper we use variation among first and second generation european migrants to isolate the effect of culturally determined labor leisure preferences on individual employment rates if migrants maintain some of their country of origin labor leisure preferences as they move to different labor market conditions we can separate the impact of these culturally determined preferences from the effect of other factors we find that country specific labor leisure preferences explain about 24 of the top bottom variation in employment rates across european countries

the determinants and the selection of mexico us migrants using data from the mexican family life survey mxfls a panel of mexican individuals interviewed in 2002 and 2005 we analyze the characteristics of migrants from mexico to the us relative to non migrates and those who migrated and subsequently returned to mexico using pre and post migration earnings and their earnings in the us from the american community survey acs we characterize the selection of migrants on observable and non observable characteristics merging the data with us american community survey data we can also measure the expected earnings premium of migration to the us and the earnings premium for those that returned to mexico we find that migrants respond to the expected earnings premium to migration once we control for migration costs also the structure of the premium across skill groups generates negative selection on average and it can explain selection on observable and unobservables we also find that returnees are more positively selected over skills than migrants to the us initial poverty old age and family ties are strong deterrents of migration to the us once we account for the skill specific migration premium we also fi nd as trong under representation of college educated among migrants to the us possibly a consequence of the fact that undocumented migration is not an attractive option for those individuals

differential fertility human capital and development using micro data from 48 developing countries this paper studies changes in crosssectional patterns of fertility and child investment over the course of the demographic transition before 1960 children from larger families obtained more education in large part because they had richer and more educated parents by century s end these patterns had reversed consequently fertility differentials by income and education historically raised the average education of the next generation but they now reduce it while the reversal is unrelated to changes in gdp per capita women s work sectoral composition or health roughly half is attributable to rising aggregate education in the parents generation the results support a model in which rising skill returns lowered the minimum income at which parents invest in education

inequalities and the individualization of wealth abstract we document the individualization of wealth in france between 1998 and 2015 using precise survey data on the property titles of assets it is characterized by an increase in the share of wealth which is individualized by spouses vs jointly owned and by an increase in the share of wealth held by singles we show that the usual measures of wealth inequality which allocate the same share of household wealth to each spouse or partner overestimate the share of wealth held by women this results in an underestimation of both the level and the growth of a wealth inequality between individuals and b the gender wealth gap we argue for better consideration of the ownership status and intra household distribution of wealth in the measurement of wealth inequality

pigou meets mirrlees on the irrelevance of tax distortions for the second best pigouvian tax this paper extends the mirrlees 1971 model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities using general utility structures and exploring both linear and non linear taxes it is demonstrated that the optimal second best tax on an externality generating good should not be corrected for the marginal cost of public funds since it equals one in the optimal tax system in the optimum distortions of income taxes are equal to marginal redistributional gains if the government does not have access to a non distortionary marginal source of finance the marginal cost of public funds can be either larger or smaller than one depending on subjective preferences for income redistribution the optimal second best corrective tax is then either higher or lower than the pigouvian level the findings in this paper generalize and amend prior results based on representative agent models shedding new light on the weak double dividend hypothesis and on the welfare gains of recycling revenue from environmental taxes

optimal redistribution and monitoring of labor supply this paper extends the mirrlees 1971 model of optimal non linear income taxation with a monitoring technology that allows the government to verify labor supply at a positive but non infinite cost we analyze the joint determination of the non linear monitoring and tax schedules and the conditions under which these can be implemented monitoring of labor supply reduces the distortions created by income taxation and raises optimal marginal tax rates possibly above 100 the optimal intensity of monitoring increases with the marginal tax rate and the labor supply elasticity our simulations demonstrate that monitoring strongly alleviates the trade off between equity and efficiency welfare gains of monitoring are around 2 8 of total output the optimal intensity of monitoring follows a u shaped pattern similar to that of optimal marginal tax rates our paper can explain why large welfare states optimally rely on work dependent tax credits active labor market policies benefit sanctions and work bonuses in welfare programs

fairness self interest and the politics of the progressive income tax all advanced democracies have adopted income taxes with considerable progression in marginal tax rates to explain this we examine the nature of individual and collective preferences over alternative tax schedules in the context of a simple two sector model we first consider the case of altruistic or sociotropic citizens who view the income tax as a means of achieving a fairer or more egalitarian distribution of income we show that greater marginal rate progressivity may well be less fair that a fairest tax however defined is always a linear or flat rate schedule in which all incomes are taxed at the same marginal rate and that with a purely sociotropic electorate there exists a flat rate schedule which is a majority equilibrium we then show that with self interested voters who seek to minimize their own tax burdens greater marginal rate progression may well be preferred by middle and upper income voters that for middle income citizens the optimal schedule is a sharply progressive one and that within the set of individually optimal schedules there exists a majority equilibrium which is a progressive schedule which minimizes the burden on median income or middle class citizens at the expense of lower and upper income taxpayers

why doesn t technology flow from rich to poor countries what determines the technology that a country adopts while there could be many factors the e ciency of the country s nancial system may play a signi cant role to address this question a dynamic contract model is embedded into a general equilibrium setting with competitive intermediation the ability of an intermediary to monitor and control the cash ows of a rm plays an important role in a rm s decision to adopt a technology can such a theory help to explain the

taking versus taxing an analysis of conscription in a private information economy most countries currently man their militaries through conscription i e a draft conventional wisdom suggests that by lowering the budgetary cost of the military a draft reduces distortionary taxation especially when military needs are large we find that this intuition is misguided when income taxes are set optimally voluntary enlistments lead to less distortionary taxation than a draft because the tax base left behind by a volunteer army tends to be more productive than that after a draft for reasonable parameter values drafts are more distortionary and less socially desirable when military needs are large

on the sign of the optimum marginal income tax this paper studies a central aspect of optimal income taxation as modelled in mirrlees original paper on the topic identical leisure consumption preferences qualitatively homogeneous skills in production namely whether given concave utilitarianism alone the optimal marginal income tax will be non negative a well known positive answer to this question in weak inequality form was given in the said paper which however we show requires additive separability of individual utility in the ordinal and cardinal senses our main result here is to derive the required strict positivity of the marginal tax under weak conditions slightly wider than noninferiority of consumption and leisure with preferences otherwise arbitrary

using elasticities to derive optimal income tax rates this paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates a simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution in the general non linear income tax problem this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of mirrlees the optimal non linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution these formulas are implemented numerically using empirical earning distributions and a range of realistic elasticity parameters

on the optimal income taxation and educational decisions abstract in this paper we consider three different ways of incorporating individuals educational choices into the design of optimal income tax policy in one variant of the model case 2 where an individual chooses his education before knowing his ability and after that education makes his labour supply decisions on the basis of known ability it is shown that qualitative features of the optimal income tax schedule are not similar to those of the standard optimal income tax model the marginal tax rate is generally not zero at the endpoints of distribution but is most likely negative using numerical methods some interesting features quite different from earlier numerical results are revealed especially in the second case for example the marginal tax rate is non decreasing in income for a substantial income range in addition our calculations support neither the traditional views on the egalitarian nature of equal education nor its disadvantageous consequences in the perfect utilitarian society

james mirrlees contributions to the theory of information and incentives the theory of information and incentives has revolutionized economics we now understand how markets and other modes of private economic transaction as well as public policy are affected when different participants have different information or when the actions of some participants are not observable to others mirrlees has made pathbreaking contributions arguably the two most important contributions to the development of these ideas and methods of analysis his review of economic studies article 1971c on optimal nonlinear income taxation introduced a technique that evolved into the revelation principle which fully characterizes all policies that are incentive compatible or feasible under information asymmetry this technique is now the workhorse model for numerous applications his bell joumal of economics article 1976a on hierarchies and organizations and some of his important unpublished yet widely circulated papers referred to below played a similar role for the theory of the design of incentives to induce effort he identified the precise way in which observable outcomes convey probabilistic information about the underlying unobservable action and thereby clarified how rewards or punishments based on outcomes can serve as incentives to action mirrlees developed these ideas in the context of specific applications however they are truly fundamental to economic theory and they have profoundly influenced subsequent thinking and research on the design of

early childhood education and economic growth abstract we study the effects of early childhood skill formation on productivity and schooling we add early childhood human capital to a standard continuous time life cycle economy and assume complementarity between educational stages agents are homogenous and choose the intensity of preschool education how long to stay in formal school labor effort and consumption the model is calibrated to the us from 1961 to 2008 and matches the data very well and closely reproduces the paths of schooling hours worked relative prices and gdp we find that early childhood education can explain a large part of the observed increase of years of schooling in the u s since 1961 and it was as important as formal education for the increase of labor productivity in the period furthermore we show that small reallocations of public expenditures from formal education to early childhood education would have sizable impacts on income per capita and productivity

the contribution of rising school quality to u s economic growth abstract u s public school expenditures per pupil increased by a factor of 9 during the 20th century this paper quantifies how much u s labor quality has grown due to the rise in educational spending a schooling model and cross sectional earnings variations across cohorts are exploited to identify the effect of the increased school expenditures on labor quality growth the findings are that i u s labor quality increased by 0 4 per year between 1967 and 2000 one fifth of which is attributable to the rise in educational spending and ii labor quality growth explains one quarter of the rise in labor productivity

the missing wealth of nations are europe and the u s net debtors or net creditors this paper shows that official statistics substantially underestimate the net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens drawing on systematic anomalies in portfolio investment positions and a unique swiss dataset i find that 8 of the global financial wealth of households is held in tax havens 6 of which goes unrecorded on the basis of plausible assumptions accounting for unrecorded assets turns the eurozone officially the world s second largest net debtor into a net creditor it also reduces the u s net debt significantly the results shed new light on global imbalances and challenge the widespread view that after a decade of poor to rich capital flows external assets are now in poor countries and debts in rich countries i provide concrete proposals to improve international investment statistics

mortality reductions educational attainment and fertility choice this paper develops a model where reductions in mortality are the main force behind economic development the model generates a pattern of changes similar to the demographic transition where gains in life expectancy at birth are followed by reductions in fertility and increases in the rate of human capital accumulation the onset of the transition is characterized by a critical level of life expectancy at birth which marks the movement of the economy from a malthusian equilibrium to an equilibrium with investments in human capital and the possibility of long run growth

does schooling cause growth a number of economists find that growth and schooling are highly correlated across countries a model is examined in which the ability to build on the human capital of one s elders plays an important role in linking growth to schooling the model is calibrated to quantify the strength of the effect of schooling on growth by using evidence from the labor literature on mincerian returns to education the upshot is that the impact of schooling on growth explains less than one third of the empirical cross country relationship the ability of reverse causality to explain this empirical relationship is also investigated

on the long run evolution of inheritance france 1820 2050 this paper attempts to document and account for the long run evolution of inheritance we find that in a country like france the annual flow of inheritance was about 20 25 of national income between 1820 and 1910 down to less than 5 in 1950 and back up to about 15 by 2010 a simple theoretical model of wealth accumulation growth and inheritance can fully account for the observed u shaped pattern and levels using this model we find that under plausible assumptions the annual bequest flow might reach about 20 25 of national income by 2050 this corresponds to a capitalized bequest share in total wealth accumulation well above 100 our findings illustrate the fact that when the growth rate g is small and when the rate of return to private wealth r is permanently and substantially larger than the growth rate say r 4 5 vs g 1 2 which was the case in the 19th century and early 20th century and is likely to happen again in the 21st century then past wealth and inheritance are bound to play a key role for aggregate wealth accumulation and the structure of lifetime inequality contrarily to a widely spread view modern economic growth did not kill inheritance

optimal linear income taxation with general equilibrium effects on wages abstract the paper argues that the endogeneity of wages may make a considerable difference to optimal linear tax rates in this case there is not only the usual direct redistribution via the fiscal system but also the general equilibrium redistribution due to the change in wages depending on the elasticity of substitution of the production function and the labour supply elasticities these may be reinforcing or opposing it is shown that the general equilibrium effect may plausibly outweigh the direct effect so that net redistribution to the lower paid involves a wage subsidy financed by a lump sum tax

optimum taxation with errors in administration abstract the paper compares the welfare levels which can be achieved by two distinct tax regimes lump sum taxation where one attempts to identify individuals and allocate transfers or subsidies on the basis of characteristics and income taxation where characteristics are not observed but personal incomes are measured and taxed where there are no errors in classifying individuals lump sum taxation is superior but where mistakes are made in the allocation of lump sum grants or subsidies income taxation may be more attractive the level of errors where the regimes are equally desirable in terms of social welfare is computed in simple models following that of feldstein 1973 where there is strong aversion to inequality then income taxation becomes preferable at quite small errors in analysing income taxation it is shown that in the feldstein model with endogenous wages the marginal tax rate in optimum income taxation on the more skilled is negative and that on the less skilled is positive in contrast to the standard results see seade 1977 with exogenous wages

on the optimal income taxation some further numerical results abstract using numerical calculations we show in the optimal income tax model that a realistic value for the elasticity of substitution between consumption and leisure 0 5 leads to conclusions different from some of those drawn by mirrlees 1971 and atkinson 1973 the marginal tax rates are not so low and the shape of the tax schedule is for a great majority of the population substantially nonlinear a new feature in our calculations is that both results come out without going to maximin as done by atkinson 1973 we study in special cases the locality of the zero limit of the marginal tax rate at the upper end of the ability distribution and we achieve a very definite conclusion this result is really very local we also present an interesting approximation result concerning the relationship between the level of the government revenue and the marginal tax rate for individuals with high ability an important methodological remark analogous to sen s critique on the ethical measures of inequality is made on the interpretation of optimal income tax calculations

human capital pricing equations with an application to estimating the effect of schooling quality on earnings this paper formulates and estimates alternative models for the pricing of labor services we present economic models that rationalize empirical specifications in the literature and we offer evidence on the validity of those specifications widely used efficiency units models of labor services are inconsistent with evidence from the u s labor market a model of heterogeneous skills provides a more accurate description of earnings data we present evidence that the pursuit of comparative advantage and selective migration are important features of the u s labor market when these features are included in the model the only support for an effect of schooling quality on earnings is through the return to college education three interactions are empirically important in explaining log wage equations a between schooling quality and education b between regional labor market shocks and education and c between region of residence and regionof birth because of this third interaction which can arise from comparative advantage in the labor market no unique quality effect on returns to education can be defined independently of the market in which it is used

optimal top marginal tax rates under income splitting for couples abstract this paper provides formulas for optimal top marginal tax rates when couples are taxed according to income splitting between spouses consumption is taxed and the skill distribution is unbounded optimal top marginal income tax rates are computed for germany using a dataset that includes the tax returns of all german top taxpayers we find that the optimal top marginal tax rate converges to about 2 3 and convergence obtains at income levels that are substantially higher than those currently subject to the actual top tax rate

the human capital stock a generalized approach this paper presents a new framework for human capital measurement the generalized framework can i substantially amplify the role of human capital in accounting for cross country income dierences and ii reconcile the existing con ict between regression and accounting evidence in assessing the wealth and poverty of nations one natural interpretation emphasizes dierences across economies in the acquisition of advanced knowledge by skilled workers

monetary policy and wealth inequality over the great recession in the uk an empirical analysis abstract we use detailed micro information at household level from the wealth and assets survey to construct measures of wealth inequality from 2006 to 2018 at the monthly frequency we investigate the dynamic relationship between monetary policy and the evolution of wealth inequality measures our findings suggest that expansionary monetary policy shocks lead to an increase in wealth inequality and contributed significantly to its fluctuations this effect is heterogenous across the wealth distribution with the monetary shock affecting the median household relative to the 10th and 20th percentile by a larger amount than the right tail our results suggest that the shock is transmitted through changes in net property and financial wealth

optimal income taxation an example with a u shaped pattern of optimal marginal tax rates comment using the mirrlees optimal income tax model with quasi linear preferences the paper examines conditions for marginal tax rates to be rising at high income levels and declining in an interval containing the modal skill it examines conditions for the marginal tax rate to be higher at a low skill level than at the high skill level with the same density an argument only holding for skill levels above a cutoff where resources of a worker are marginally of the same value as resources of the government data on earnings rates are presented copyright 1998 by american economic association

equipment and structures capital accounting for income differences i introduction cross country differences in income per worker are enormous the ratio of 90th to 10th percentile in the world income distribution is over 20 penn world tables pwt version 6 3 see heston summers and aten 2009 the literature on income differences points to the importance of differences in stocks of physical capital across countries it is well known that rich countries have much larger stocks of physical capital than poor countries the capital output ratio in the country at the 90th percentile of the world income distribution is over three times the capital output ratio in the 10th percentile country the 90 10 ratio of capital per worker is also large at nearly 75 in fact the cross country dispersion in physical capital is more than the dispersion in income per worker see figure 1 little is known about the composition of physical capital across countries most of the literature treats physical capital as a homogeneous good international dollar values of all types of capital goods are summed up to arrive at the aggregate capital stock of a country with prices acting as weights even if the relative valuations of various types of capital are captured by the prices their relative contributions to output and hence the contribution of capital composition are not accounted for by the prices such an aggregation also assumes that the various types of capital are perfect substitutes of one another which is clearly not the case using the u s data on manufacturing sato 1967 estimates the elasticity of substitution between equipment and structures and finds that the two kinds of capital are far from being perfect substitutes in this article i present purchasing power parity ppp measures of the stocks of equipment capital and structures capital for 119 countries and demonstrate that the composition of capital is systematically related with the income per worker to construct the stocks of equipment and structures capital i use data on the ppp investment levels for equipment and structures during 1950 2004 and employ the perpetual inventory method equipment corresponds to fabricated metal products electrical and nonelectrical machinery transport equipment communication equipment office machinery and professional and scientific equipment structures comprise both residential and nonresidential buildings the cross country dispersion in equipment capital is much larger than the dispersion in structures capital and aggregate capital the equipment capital output ratio is a factor of about 7 between rich and poor countries while the structures capital output ratio is a factor of 3 and the aggregate capital output ratio is a factor of 3 3 the composition of capital is systematically related with the income levels on average equipment is 21 of the total capital stock in rich countries and 8 in poor countries the dispersion in equipment capital has also increased over time while the dispersion in structures has declined this systematic variation of heterogeneous capital with incomes is potentially significant for the income differences across countries as also previously noted by caselli 2005 figure 1 omitted the success of factors in accounting for income differences is determined by the way we model and measure factors across countries in the absence of measures of heterogeneous capital standard development accounting exercises have attributed a large fraction of the income differences to unknown total factor productivity tfp differences in this article i conduct development accounting with equipment and structures capital to determine the significance of capital composition for the income differences for development accounting i consider both cobb douglas and constant elasticity of substitution ces specifications to aggregate equipment and structures within a cobb douglas production function 1 in my sample of 119 countries for the year 2004 the log variance in income per worker is 1

how important is human capital a quantitative theory assessment of world income inequality we develop a quantitative theory of human capital investment in order to evaluate the magnitude of cross country dierences in total factor productivity tfp that explains the variation in per capita incomes across countries we build a heterogeneousagent economy with cross sectional variation in ability schooling and expenditures on schooling quality in our theory the parameters governing human capital production and random ability process have important implications for a set of cross sectional statistics mincer return variance of earnings variance of schooling and intergenerational correlation of earnings these restrictions of the theory and u s household data are used to pin down the key parameters driving the quantitative implications of the theory our main finding is that human capital accumulation strongly amplifies tfp dierences across countries in particular we find an elasticity of output per worker with respect to tfp of 2 8 a 3 fold dierence in tfp explains a 20 fold dierence in output per worker we argue that the cross country dierences in human capital implied by the theory are consistent with a wide array of evidence including earnings of immigrants in the united states average mincer returns across countries and the relationship between average years of schooling and per capita income across countries the theory implies that using mincer returns to measure human capital understates dierences across countries by a factor of 2

optimal degree of progressivity under income uncertainty the insurance effect is introduced into the design of the optimal income tax policy when individual income is uncertain one of the most noteworthy aspects of this analysis is that now it is even more difficult to derive analytically useful results for income tax policy purposes than it was in earlier analyses using numerical methods it is shown that under quite reasonable assumptions regarding utility function and income distribution we obtain a progressive marginal tax rate structure which is rather similar to the structures actually observed in many countries

what do we know about evolution of top wealth shares in the united states in piketty s 2014 prominent book capital in the twenty first century he argues that the concentration of wealth may become increasingly extreme in the future as piketty reminds us the group of rentiers people living off accumulated capital has been historically large and politically and socially influential because so much of large fortunes end up being inherited the current concentration of wealth is bound to predict at least weakly and perhaps strongly how important rentiers will be regardless of whether one buys into depictions such as the rentier enemy of democracy p 422 the extent to which the well off are going to rely on work versus rely on the returns to their wealth in the future is clearly important for assessing the extent to which a society will view itself as in some way a meritocracy given that the us economy has experienced rising inequality in its income and earning distributions for example piketty and saez 2003 or see the symposium on the top 1 percent in the summer 2013 issue of this journal one would expect that the distribution of wealth would follow a similar path however available evidence on this topic is much more scant and conflicting than that on income and earnings in fact when piketty 2014 reports direct estimates of wealth concentration for france the united kingdom sweden and the united states in chapter 10 of his book he finds as yet little evidence of dramatic increase in wealth concentration in any of these countries

intergenerational persistence of earnings the role of early and college education recent empirical evidence from the united states indicates a high degree of persistence in earnings across generations designing effective public policies to increase social mobility requires identifying and measuring the major sources of persistence and inequality in earnings we provide a quantitative model of intergenerational human capital transmission that focuses on three sources innate ability early education and college education we find that approximately one half of the intergenerational correlation in earnings is accounted for by parental investment in education in particular early education we show that these results have important implications for education policy

school inputs and educational outcomes in south africa we examine the relationship between educational inputs primarily pupilteacher ratios and school outcomes in south africa immediately before the end of apartheid government black households were severely limited in their residential choice under apartheid and attended schools for which funding decisions were made centrally by white controlled entities over which they had no control the allocations resulted in marked disparities in average class sizes controlling for household background variables we find strong and significant effects of pupilteacher ratios on enrollment on educational achievement and on test scores for numeracy

does school quality matter returns to education and the characteristics of public schools in the united states this paper estimates the effects of school quality measured by the pupil teacher ratio average term length and relative teacher pay on the rate of return to education for men born between 1920 and 1949 using earnings data from the 1980 census we find that men who were educated in states with higher quality schools have a higher return to additional years of schooling rates of return are also higher for individuals from states with better educated teachers and with a higher fraction of female teachers holding constant school quality measures however we find no evidence that parental income or education affects average state level rates of return

a reexamination of the optimal nonlinear income tax abstract this paper investigates mirrlees model of optimal income taxation it provides a concrete example of utility and density functions for which the solution to the usual first order model is not implementable i e and example where the first order approach does not work adding second order conditions leads to an extended model and to implementable solutions if these conditions are binding one gets a kink in the optimal net income schedule and bunching of individuals occurs the properties of an optimal nonlinear income tax are reexamined within the extended model

wealth concentration in a developing economy paris and france 1807 1994 using large samples of estate tax returns we construct new series on wealth concentration in paris and france from 1807 to 1994 inequality increased until 1914 because industrial and financial estates grew dramatically then adverse shocks rather than a kuznets type process led to a massive decline in inequality the very high wealth concentration prior to 1914 benefited retired individuals living off capital income rentiers rather than entrepreneurs the very rich were in their seventies and eighties whereas they had been in their fifties a half century earlier and would be so again after world war ii our results shed new light on ongoing debates about wealth inequality and growth

cross country differences in the quality of schooling abstract this paper constructs a cross country measure of the quality of education using a novel approach based on international test scores data the first main finding is that there are large differences in education quality one year of schooling in the u s is equivalent to three or more years of schooling in a number of low income countries i incorporate the estimated series for schooling quality in an accounting framework calibrated using evidence on mincerian returns this leads to the second important finding which is that the fraction of income differences explained by the model rises substantially when one includes education quality the increase is around 22 percentage points

school quality and returns to education of u s immigrants using the u s labor market as a common point of reference this article investigates the influence of source country school quality on the returns to education of immigrants based on 1980 and 1990 census data we first estimate country of origin specific returns to education results reveal that immigrants from japan and northern europe receive high returns and immigrants from central america receive low returns next we examine the relationship between school quality measures and these returns holding per capita gdp and other factors constant immigrants from countries with lower pupil teacher ratios and greater expenditures per pupil earn higher returns to education

human capital and the wealth of nations we reevaluate the role of human capital in determining the wealth of nations we use standard human capital theory to estimate stocks of human capital and allow the quality of human capital to vary across countries our model can explain differences in schooling and earnings profiles and consequently estimates of mincerian rates of return across countries we find that effective human capital per worker varies substantially across countries cross country differences in total factor productivity tfp are significantly smaller than found in previous studies our model implies that output per worker is highly responsive to changes in tfp and demographic variables jel e23 i25 j24 j31 o47 no question has perhaps attracted as much attention in the economics literature as why are some countries richer than others much of the current work traces back to the classic work of solow 1956 solow s seminal paper suggested that differ ences in the rates at which capital is accumulated could account for differences in output per capita more recently following the work of lucas 1988 human capital disparities were given a central role in the analysis of growth and development however the best recent work on the topic reaches the opposite conclusion klenow and rodriguez clare 1997 hall and jones 1999 parente and prescott 2000 and bils and klenow 2000 argue that most of the cross country differences in output per worker are not driven by differences in human capital or physical capital rather they are due to differences in a residual total factor productivity tfp in this paper we revisit the development problem in line with the earlier view we find that factor accumulation is more important than tfp in accounting for relative incomes across countries the key difference between our work and previous analyses is in the measurement of human capital the standard approach largely inspired by the work of mincer 1974 takes estimates of the rate of return to schooling as building blocks to directly measure a country s stock of human capital implicitly this method assumes that the marginal contribution to output of one additional year

on the share of inheritance in aggregate wealth europe and the usa 1900 2010 this paper provides historical series on the evolution of the share of inherited wealth in aggregate private wealth in europe france the uk germany sweden and the usa over the 1900 2010 period until 1910 the inheritance share was very high in europe 70 80 it then fell abruptly following the 1914 45 shocks down to about 30 40 during the 1950 80 period and is back to 50 60 and rising since around 2010 the us pattern also appears to be u shaped albeit less marked and with significant uncertainty regarding recent trends due to data limitations we discuss possible interpretations for these long run patterns

skill complementarity and the dual economy abstract i propose a new explanation for the large productivity gaps between agriculture and nonagriculture observed in developing countries namely that the elasticity of substitution between skilled and unskilled workers is higher in agriculture than in nonagriculture i estimate the elasticities in a cross country data set and use the results to simulate a simple two sector model in which heterogeneous elasticities of substitution affect relative sectoral productivity levels through the allocation of human capital calibrated to match data from the united states the model predicts sizable agricultural productivity gaps in countries where the share of highly educated workers in the labor force is low

are refugees different from economic immigrants some empirical evidence on the heterogeneity of immigrant groups in the united states this paper analyzes how the implicit difference in time horizons between refugees and economic immigrants affects subsequent human capital investments and wage assimilation the analysis uses the 1980 and 1990 integrated public use samples of the census to study labor market outcomes of immigrants who arrived in the united states from 1975 to 1980 i find that in 1980 refugee immigrants in this cohort earned 6 less and worked 14 fewer hours than economic immigrants both had approximately the same level of english skills the two immigrant groups had made substantial gains by 1990 however refugees had made greater gains in fact the labor market outcomes of refugee immigrants surpassed those of economic immigrants in 1990 refugees from the 1975 1980 arrival cohort earned 20 more worked 4 more hours and improved their english skills by 11 relative to economic immigrants the higher rates of human capital accumulation for refugee immigrants contribute to these findings

tax policy and human capital formation missing from recent discussions of tax reform is any systematic analysis of the effects of various tax proposals on skill formation this gap in the literature in empirical public finance is due to the absence of any empirically based general equilibrium models with both human capital formation and physical capital formation that are consistent with observations on modern labor markets this paper is a progress report on our ongoing research on formulating and estimating dynamic general equilibrium models with endogenous heterogeneous human capital accumulation our model explains many features of rising wage inequality in the u s economy james heckman lance lochner and christopher taber 1998 in this paper we use our model to study the impacts on skill formation of proposals to switch from progressive taxes to flat income and consumption taxes for the sake of brevity we focus on steady states in this paper although we study both transitions and steady states in our research this abstract was borrowed from another version of this item

inherent inequality and the optimal graduation of marginal tax rates in most countries marginal tax rates increase with income this is at variance with the results of the optimal income taxation literature whose numerical calculations have established the presumption that optimal marginal tax rates should decline with income have the existing results of optimal income tax literature therefore established a presumption that the observed pattern is suboptimal the object of this paper is to attempt to answer this question the numerical calculations that followed mirrlees s 1971 pioneering contribution tried many variations on his basic parametrisation including different preference structures and different functional forms however so far as we are aware most of the reported results maintain his basic assumption of a log normal distribution of abilities or wages with a standard deviation of logs of 0 39 mirrlees 1971 himself appealed the work of lydall 1969 for this figure but it has become the industry standard we show in this paper that departures from this assumption in particular increases in inherent inequality can alter the qualitative pattern of optimal marginal tax rates dramatically contrary to the currently available calculations we show that the optimal graduation can indeed be such that marginal tax rates increase for the majority of the population which is consistent with the observed pattern but that there continues to exist a significant income range at the top where marginal tax rates decline which of course is counter to the observed pattern

how important is human capital for development evidence from immigrant earnings this paper offers new evidence on the sources of cross country income differences it exploits the idea that observing immigrant workers from different countries in the same labor market provides an opportunity to estimate their human capital endowments these estimates suggest that human and physical capital account for only a fraction of cross country income differences for countries below 40 of the us output per worker less than half of the output gap relative to the us is attributed to human and physical capital

human capital in the long run abstract this study presents new data sets on long run enrollment ratios educational attainment and human capital stock measures for numerous countries we construct a complete data set of historical enrollment ratios subdivided by education level and gender for 111 countries from 1820 to 1945 at five year intervals by using newly compiled census observations and information on the year of establishment of the oldest school in individual countries then by utilizing these enrollment ratios as well as available census data from 1945 onward on different age groups educational attainment we construct a data set of estimated educational attainment disaggregated by gender and age group and aggregate human capital stock that spans from 1870 to 2010 the data show that over the past two centuries there has been remarkable growth in average educational attainment and human capital stock as well as a narrowing of the gap in average educational attainment between nations

how work effort responds to wage taxation an experimental test of a zero top marginal tax rate abstract phelps 1973 sadka 1976 seade 1977 presented theorems that showed work effort could increase if the marginal tax rate was zero at the top income this was tested in a laboratory experiment the prediction was supported

optimal linear commodity taxation under optimal non linear income taxation abstract this paper analyzes optimal linear commodity taxes joint with non linear income taxes we provide optimal tax rules based on empirically observable elasticities earnings and commodity demands we demonstrate that commodities should be taxed subsidized if conditional on earnings doing so boosts labor supply as the critical role of commodity taxation is to alleviate distortions on labor supply caused by income taxation we extend the standard formula for optimal non linear income taxation for the presence of optimal linear commodity taxes we correct parts of the literature by showing that the optimal second best allocations derived by atkinson and stiglitz 1976 1980 cannot be supported by linear commodity taxes

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

appropriate technology and income differences this article studies the relative productivity of skilled to unskilled workers across countries relative productivities are broken down into the human capital embodied in skilled workers and relative physical productivities reflecting production techniques i find that skilled workers from poorer countries embody less human capital and are also relatively less physically productive furthermore results show that production techniques are inappropriate for most low income countries and these countries experience large increases in gdp per capita by increasing the relative physical productivity of skilled to unskilled workers this suggests that there are significant barriers to the adoption of skill complementary technologies

education quality and development accounting this paper measures the role of quality adjusted years of schooling in accounting for cross country output per worker differences while data on years of schooling are readily available data on education quality are not i use the returns to schooling of foreign educated immigrants in the u s to measure the education quality of their birth country immigrants from developed countries earn higher returns than do immigrants from developing countries i show how to incorporate this measure of education quality into an otherwise standard development accounting exercise the main result is that cross country differences in education quality are roughly as important as cross country differences in years of schooling in accounting for output per worker differences raising the total contribution of education from 10 to 20 of output per worker differences copyright 2012 oxford university press

semiparametric econometrics a survey summary semiparametric econometric models contain both parametric and nonparametric components reflecting in some fashion what has been learned from economic theory and previous empirical experience and what remains unknown they raise such questions as how well the parametric component can be estimated and how to construct rules of inference with good statistical properties the paper attempts to survey the econometric and most relevant statistical literature on semiparametric inference and includes a partial bibliography

human capital and development accounting new evidence from wage gains at migration we use new data on the pre and postmigration wages of immigrants to the united states to measure wage gains at migration the average immigrant from a middle income or poor country increases their wage by a factor of two to three upon migration this wage gain is small relative to the underlying gap in gdp per worker in a development accounting framework this finding implies that switching countries accounts for 40 of cross country income differences while human capital accounts for 60 wage gains decline with education consistent with imperfect substitution between skill types we augment our analysis to allow for this possibility and bound the human capital share in development accounting to between one half and two thirds we also provide results on the importance of premigration sector of employment assimilation and skill transfer

the costs of occupational mobility an aggregate analysis we estimate the costs of occupational mobility using a novel approach that relies on aggregate flows of workers across occupations rather than on wage data the theoretical underpinnings for this approach are derived from a model of occupation choice that delivers a gravity equation linking worker flows to occupation characteristics and to transition costs which we proxy using task data from the dictionary of occupational titles dot occupation flow data are constructed from the matched monthly current population survey cps between 1994 and 2012 we find that transition costs vary widely across occupations are increasing in task distance the dissimilarity in the mix of tasks performed in the two occupations and are higher for transitions across broad task categories however most of the transition costs are accounted for by general task independent entry costs specific to each destination occupation

wealth inequality in the united states since 1913 evidence from capitalized income tax data this paper combines income tax returns with flow of funds data to estimate the distribution of household wealth in the united states since 1913 we estimate wealth by capitalizing the incomes reported by individual taxpayers accounting for assets that do not generate taxable income we successfully test our capitalization method in three micro datasets where we can observe both income and wealth the survey of consumer finance linked estate and income tax returns and foundations tax records wealth concentration has followed a u shaped evolution over the last 100 years it was high in the beginning of the twentieth century fell from 1929 to 1978 and has continuously increased since then the rise of wealth inequality is almost entirely due to the rise of the top 0 1 wealth share from 7 in 1979 to 22 in 2012 a level almost as high as in 1929 the bottom 90 wealth share rst increased up to the mid 1980s and then steadily declined the increase in wealth concentration is due to the surge of top incomes combined with an increase in saving rate inequality top wealth holders are younger today than in the 1960s and earn a higher fraction of total labor income in the economy we explain how our ndings can be reconciled with survey of consumer finances and estate tax data

optimal fiscal policy with redistribution i study the optimal taxation oflabor and capital in a dynamic economy subject to government expenditure and technology shocks unlike representative agent ramsey models workers are heterogenous and lump sum taxation is not ruled out i consider two tax scenarios a linear taxation with a lump sum intercept and b nonlinear mirrleesian taxation when taxes are linear i derive a partial equivalence result with ramsey settings that provides a reinterpretation of such analyses i find conditions for perfect tax smoothing oflabor income taxes and zero capital taxation implications that contrast with ramsey are derived for public debt management for the nature of the time inconsistency problem and for the viability of replicating complete markets without state contingent bonds shifts in the distribution of skills provide a novel source for variations in tax rates for the nonlinear tax scenario i show that taxation based on income averages is optimal

teachers growth and convergence this paper examines the role of individual instruction and teacher quality in determining economic growth and convergence across school districts the model shows that if teacher quality is more important for human capital accumulation than individual instruction human capital convergence will occur between two school districts this convergence arises because a poor school district hires relatively better teachers but uses them in larger classes in comparison with a rich school district the model is estimated on panel data of the states of the united states from 1882 to 1990 the estimates indicate that teacher quality is relatively more important for human capital accumulation than individual instruction the model accounts for all the mean growth in state per capita incomes and between 80 and 100 percent of convergence in state per capita incomes

human capital and earnings distribution dynamics abstract earnings heterogeneity plays a crucial role in modern macroeconomics we document that mean earnings and measures of earnings dispersion and skewness all increase in us data over most of the working life cycle for a typical cohort as the cohort ages we show that i a human capital model can replicate these properties from the right distribution of initial human capital and learning ability ii differences in learning ability are essential to produce an increase in earnings dispersion over the life cycle and iii differences in learning ability account for the bulk of the variation in the present value of earnings across agents these findings emphasize the need to further understand the role and origins of initial conditions

top wealth shares in the uk over more than a century abstract recent research highlighted controversy about the evolution of concentration of personal wealth in this paper we provide new evidence about the long run evolution of top wealth shares for the united kingdom the new series covers a long period from 1895 to the present and has a different point of departure from the previous literature we start with the analysis of the distribution of estates left at death we find that the application to the estate data of mortality multipliers to yield estimates of wealth among the living does not substantially change the degree of concentration over much of the period both in the uk and us allowing inferences to be made for years when this method cannot be applied the results show that wealth concentration in the uk remained relatively constant during the first wave of globalization but then decreased dramatically in the period from 1914 to 1979 the uk went from being more unequal in terms of wealth than the us to being less unequal however the decline in uk wealth concentration came to an end around 1980 and since then there is evidence of an increase in top shares notably in the distribution of wealth excluding housing in recent years we investigate the triangulating evidence provided by data on capital income concentration and on reported super fortunes

optimal human capital policies abstract we analyze optimal income taxes and optimal schooling subsidies in a dynamic private information economy with observable human capital accumulation we show that under plausible conditions the marginal schooling subsidies are positive and that they are zero at both endpoints of the skill distribution we compute the optimal policies and evaluate their impact over the transition and at the steady state we find that the optimal schooling policies are significantly smaller than the optimal marginal income taxes if optimal schooling policies are introduced jointly with optimal income taxes then their welfare and aggregate effects are small however if income taxes are not set optimally then the optimal schooling policies have significant welfare and aggregate effects

the relative importance of total factor productivity and factors of production in income per worker evidence from the brazilian states income per worker gap in different regions of brazil is stunning to assess the relative importance of factor of production and total factor productivity tfp in those income per worker disparities development accounting exercises were carried out for the 1970 1980 1990 2000 and 2010 years in 1970 both types of capital stocks and tpf gaps were associated with the brazilian states lower relative income in comparison to sao paulo state over the decades up to the year 2000 the brazilian states have experienced a relevant capital deepening process which account for income per work catching up however the tfp gaps in relation to the reference state remain almost stable and their reduction is fundamental to the maintenance of the brazilians states income per worker catching up process the conclusions remain similar when the analysis is conducted by means of distinct proxies of physical capital when considering the human capital qualitative aspect we noticed a greater human capital gap among the brazilian states in relation to sao paulo state and as a consequence a reduction in the tfp relative gap

self selection and pareto efficient taxation abstract this paper analyses the set of pareto efficient tax structures the formulation of the problem as one of self selection not only shows more clearly the similarity between this problem and a number of other problems such as the optimal pricing of a monopolist which have recently been the subject of extensive research but also allows the derivation of a number of new results we establish i under fairly weak conditions randomization of tax structures is desirable ii if different individuals are not perfect substitutes for one another in production then the general equilibrium effects until now largely ignored in the literature of changes in the tax structure may be dominant in determining the optimal tax structure in particular if the relative wage of high ability and low ability individuals depends on the relative supplies of labor the optimal tax structure entails a negative marginal tax rate on the high ability individuals and a positive marginal tax rate on the low ability individuals the marnitude of which depends on the elasticity of substitution iii if individuals differ in their preferences pareto efficient taxation may entail negative marginal tax rates for high incomes while iv if wage income is stochastic the marginal tax rate at the upper end may be 100 our analysis thus makes clear that the main qualitative properties of the optimal tax structure to which earlier studies called attention are not robust to these attempts to make the theory more realistic