a critical evaluation of rate of return analysis since the development of the concept of human capital schultz i 96 i becker i964 analysis of rates of return has been a standard means of assessing education the conventional way of measuring the return to education is to take a snap shot view of the earnings of people with differing educational experiences it is then possible to calculate the average income earned at different stages of a working life the rate of return to education can then be calculated as the internal discount rate which equates the discounted increment to average earnings to the costs involved in obtaining education both private and social rates of return can be calculated provision of education is often subsidised so that the private cost is lower than the social cost and this will tend to raise the private return above the social return taxation of the private benefit of education offsets this at least partly however ziderman i 973 records that in developed countries private returns normally exceed social returns this pattern is confirmed by psacharopoulos i985 in many cases it is not possible to calculate a full rate of return but one can look at the incremental effect of schooling on earning power thus denison i 967 suggests that in the united states each year of education raises earning power by an average of around 5 6 with the effect tending to rise with the duration of education card and kruger i992 identify effects of similar magnitude it need not be the case that education goes on raising earning power overeducation is clearly possible rudd i990 suggests that in the social sciences education beyond degree level is very damaging to earnings prospects tarsh i992 questions aspects of rudd s study but agrees that higher education graduates do suffer some pay disadvantage rate of return calculations can form the basis for policy decisions in principle social returns to investment in human capital could be compared with those on physical capital so as to give a basis for the allocation of resources between the two types of investment estimates of social rates of return to different types of education could also be used to guide expenditure decisions between these different types however there are many possibly offsetting biases entering into the calculations of rates of return and it is perhaps concern with these that has

rates of return to human capital a test using el salvador data most of the empirical work on human capital has been confined to conditions in developed countries this is probably due to difficulties in obtaining data for other countries it would be interesting to see how robust the theory and its associated models are in conditions regarded as typical for developing countries this will be considered here using a large data set describing the el salvador labor market two questions will be examined namely a how well does the earnings function of the human capital theory explain earnings distribution in el salvador and b does the return to training called experience here approximate the return to school as is often assumed in human capital research the latter issue is of course related to the notion of overtaking the point in the experience profile when the flat earnings stream is intersected from below by the earnings stream affected by postschool investments

entrepreneurial human capital and the long run survival of firms in india abstract this paper analyses the characteristics of entrepreneurs that contribute to firms survival in less developed countries ldcs the study which relies on data collected in a 1971 survey of entrepreneurs in south india and a follow up survey of surviving firms in 1993 finds that entrepreneurial human capital greatly influences firm survival the results indicate that firms founded by older entrepreneurs in higher castes are most likely to survive but that increased education of the founding entrepreneur reduces survival these results provide evidence that opportunities of entrepreneurs outside the firm ignored in most theories are important in firm survival

if we knew ability how would we tax individuals abstract the suggestion to tax people on earnings capacity instead of earnings has been around for a long time and is attractive in terms of economic efficiency in this paper we reflect on the feasibility of such a system and give an exploratory empirical implementation we apply the leyden welfare function of income a survey based measure of an individual s welfare associated with income to derive implications for ability taxation under the assumption that iq and schooling reflect earnings capacity we derive the tax functions using different criteria to distribute the utility loss due to taxation

the effect of family background on children s level of schooling attainment in spain this paper provides microeconomic estimates of the role played by family background in determining children s level of schooling attainment in spain we use an ordered logit model to explore the effects of family background and other supply factors on the probability of various educational outcomes our estimates are based on household data obtained from the ecvt living and working conditions survey ministerio de economia y hacienda 1985 a spanish nation wide household survey conducted at the end of 1985 in general and given the spanish capital constraints parental income social class and family size explain children s level of schooling these results are consistent with those of the literature that focuses on the role of family background in determining schooling attainment

effects of family background on earnings and returns to schooling evidence from brazil we investigate whether omitted family background variables are responsible for high returns to schooling estimated in brazil returns to schooling fall by about one third when parental schooling is added to wage equations surprisingly the schooling of fathers in law has larger effects on wages than the schooling of fathers on the basis of a model of assortative mating we interpret this as evidence that parental characteristics represent unobservable worker attributes rather than nepotism in the labor market we conclude that the family background bias in returns to schooling is modest and need not imply returns to family connections

the effect of unions on the structure of wages a longitudinal analysis this paper studies the effects of unions on the structure of wages using an estimation technique that explicitly accounts for misclassification errors in reported union status and potential correlations between union status and unobserved productivity the econometric model is estimated separately for five skill groups using a large panel data set formed from the u s current population survey the results suggest that unions raise wages more for workers with lower levels of observed skills in addition the patterns of selection bias differ by skill group among workers with lower levels of observed skill unionized workers are positively selected whereas union workers are negatively selected from among those with higher levels of observed skill despite a large and sophisticated literature there is still substantial disagreement over the extent to which differences in the structure of wages between union and nonunion workers represent an effect of trade unions rather than a consequence of the nonrandom selection of unionized workers over the past decade several alternative approaches have been developed to control for unobserved heterogeneity between union and nonunion workers 2 one method that has been successfully applied in other areas of applied microeconometrics is the use of longitudinal data to measure the wage gains or losses of workers who change union status unfortunately longitudinal estimators are highly sensitive to measurement error even a small fraction of misclassified union status changes can lead to significant biases if the true rate of mobility between union and nonunion jobs is low this sensitivity led lewis 1986 to essentially dismiss the longitudinal evidence in his landmark survey of union wage effects in this paper i present some new evidence on the union wage effect based on a longitudinal estimator that explicitly accounts for misclassification errors in reported union status the estimator uses external information on union status misclassification rates along with the reduced form coefficients from a multi variate regression of wages on the observed sequence of union status indicators to isolate the causal effect of unions from any selection biases introduced by a correlation between union status and the permanent component of unobserved wage heterogeneity recognizing that unions may raise wages more or less for

welfare specifications and optimal control of climate change an application of fund the sensitivity of the optimal control of carbon dioxide emissions to the specification of the social welfare function is systematically explored using the fund model increasing risk aversion emphasises climate change damages relative to emission reduction costs but at the same time increases the discount rate of consumption without international co operation the discount rate effect dominates so that optimal control decreases with increasing risk aversion with international co operation optimal control first increases then decreases with increasing risk aversion since climate change falls heaviest on the poor optimal control increases with increasing inequity aversion full fledged intergenerational welfare functions on the one hand emphasise climate change damages but on the other hand place more weight on current poorer generations in fund the two tendencies almost cancel

school supply constraints and children s educational outcomes in rural ghana abstract studies of school attainment often fail to acknowledge the possibility that prices for all schooling levels affect the decision to attend any one schooling level in developing countries the assumption that schooling costs are constant throughout the education cycle is manifestly untrue this paper concentrates on the empirical implications of introducing schooling costs that increase with schooling level the results suggest that the cost of advanced levels of education influences decisions at the primary school level the relative magnitude of the cross price elasticities suggests that cross price effects should not be ignored when designing educational user fees

labor markets in northeast brazil does the dual market model apply the economy of northeast brazil despite an impressive 7 real annual growth rate in recent years lags behind the rest of the country and far behind the dynamic south in particular with more than half of its 40 million residents living in poverty the region contains the largest concentration of the poor in latin america agriculture has traditionally been the dominant industry there but its importance is being eroded by the growth of manufacturing and services this shift has been aided by federal government policies which have provided jobs through direct government employment and have offered tax breaks subsidies advice and encouragement to large manufacturing firms in the region urban growth meanwhile especially in the major regional centers of recife fortaleza and salvador has swelled because of inflows of migrants by 1980 more than half of the population of what had been a predominantly rural region now lived in urban

optimizing agricultural land use portfolios with scarce data a non stochastic model the theory of portfolio selection has often been applied to help improve economic decisions about the environment applying this theory requires information on the covariance of uncertain returns between all combinations of the economic options and also assumes that returns are normally distributed as it is usually difficult to fulfill all data requirements and assumptions this paper proposes a variant of robust portfolio optimization as an alternative that needs less pre information the approach considers future uncertainties in a non stochastic fashion through possible deviations from the nominal return of land use alternatives maximizing the economic return of the land use portfolio is conditional on meeting an inclusive set of constraints these demand that a pre defined return threshold is achieved by the robust solution for each uncertainty scenario considered based on data for eight agricultural crops common in the ecuadorian lowlands a comparison with portfolios generated by classical stochastic mean variance optimization shows greater land use diversification through increased shannon indices but only moderate expected economic loss of non stochastic robust land use portfolios we conclude that non stochastic derivation of land use portfolios is a good alternative to the classical stochastic model in situations where information on economic input parameters is scarce

earnings functions for the self employed comment abstract the standard human capital earnings model is applied to data from a 1975 socioeconomic survey conducted in tehran iran results show that the returns to schooling for the self employed not including street vendors canvassers and newsvendors are statistically equivalent to those of wage and salary workers thus in contradiction to conclusions drawn from a study by chiswick 1976 the high rates of return to schooling found in many studies of less developed countries do not appear to be the result of the systematic exclusion of the self employed from the estimating samples in other words when wage and salary workers are compared with the self employed in similar occupations their earnings profiles are similar

long run study of residential water consumption the estimation of dynamic models and themeasure of long run effects arerare in residential water demand studies weshow in this paper that a dynamicmodel of water consumption can be derived froma structural optimisation programsolved by local communities thisnonlinear model is estimated on asample of french municipalities and is foundasymptotically equivalent to a dynamic panel data model that is linear in theparameters the latter includes anoriginal error component structure that allowsfor a flexible heterogeneity pattern including both the usual idiosyncraticeffect and an additional individualeffect affected by a multiplicative time varyingparameter as usual gmm estimators for panel data are not consistent inthis case we propose a new gmmprocedure that yields consistent and efficientestimates of short and long runprice elasticities respectively 0 26 and 0 40

an empirical survey of residential water demand modelling abstract the increased reliance on demand side management policies as an urban water consumption management tool has stimulated considerable debate among economists water utility managers regulators consumer interest groups and policymakers in turn this has fostered an increasing volume of literature aimed at providing best practice estimates of price and income elasticities quantifying the impact of non price water restrictions and gauging the impact of non discretionary environmental factors affecting residential water demand this paper provides a synoptic survey of empirical residential water demand analyses conducted in the last 25 years both model specification and estimation and the outcomes of the analyses are discussed

regulation with anticipated learning about environmental damages a regulator anticipates learning about the relation between environmental stocks and economic damages for a model with linear quadratic abatement costs and environmental damages and a general learning process we show analytically that anticipated learning decreases the optimal level of abatement at a given information set if learning causes the regulator to eventually decide that damages are higher than previously thought learning eventually increases abatement learning also favors the use of taxes rather than quotas using a model that is calibrated to describe the problem of global warming we show numerically that anticipated learning causes a significant reduction in first period abatement and a small increase in the preference for taxes rather than quotas even if the regulator s initial priors about environmental damages are much too optimistic he is able to learn quickly enough to keep the expected stock trajectory near the optimal trajectory

the value of u s labor market experience in the home country the case of puerto rican return migrants many immigrants to the united states and other industrialized economies eventually return to their home country more than one million foreign born persons left the united states between 1960 and 1970 1 research has documented return migration to israel italy ireland mexico and puerto rico as well as the return of thousands of guest workers from industrialized european economies in the mid seventies 2 however little is known about how the migration experience shapes the earnings profiles of returnees and how the economic standing of returnees compares to that of stayers in the home labor market in this article i analyze the transferability of human capital accumulated abroad by return migrants and the economic assimilation process of returnees i investigate if return migrants can capitalize at home on the years of labor market experience accumulated abroad i also examine whether return migrants assimilate that is if their earnings increase with time spent in the home labor market to evaluate how returnees fare in the home labor market the earnings of returnees are compared to the earnings of stayers one of the findings from the literature of immigration to the united states and other industrialized economies is that immigrants lose human capital on crossing national borders 3 it has also been noted that the earnings of immigrants grow with time spent in the host labor market suggesting that immigrants undergo a process of assimilation 4 most of the research on international return migrants is qualitative in nature and the small sample sizes caution about generalizations a large amount of this research has focused on rural communities the primary concern in the return migration literature has been the effect on local economic development 5

returns to education a further international update and implications this paper updates evidence on the returns to investment in education by adding estimates for new countries and refining existing estimates to bring the total number of country cases to over 60 the new cross country evidence confirms and reinforces earlier patterns namely that returns are highest for primary education the general curricula the education of women and countries with the lowest per capita income the findings have important implications for directing future investment in education which for efficiency and equity purposes should concentrate on these priority areas

premiums to employment in larger establishments evidence from peru abstract examination of the employer size wage effect for males in urban peru suggests the following higher wages in larger establishments do not merely compensate for higher worker quality or inferior working conditions size differences in the use of rising wage tenure profiles cannot provide a market clearing explanation for the employer size wage effect unless workers are extremely impatient thus larger employers appear to pay premiums unionization explains none of the premiums and minimum wage compliance explains at best a small fraction shirking based efficiency wage explanations for premiums are implausible because peruvian job security legislation greatly inhibits dismissals in larger establishments explanations meriting further research involve the use of high wages to reduce turnover and to improve productivity enhancing morale

unions collective relations laws and r d investment in emerging and developing countries abstract many scholars argue that workforce unionization leads to a reduction in r d investment because unions appropriate a share of the returns to successful inventive efforts on the other hand it is widely acknowledged that unions may encourage investment in r d because of increased cooperation between workers and management our empirical analysis on cross country firm level data from 23 emerging and developing countries reveals a negative association between workforce unionization and firms r d investment this association is particularly pronounced when unions are protected by strong collective relations laws supporting the notion that strong unions tax the returns to successful inventions our findings have implications for policy makers who seek to improve emerging countries chances of catching up to the technological frontier and for firm leaders concerned about the appropriation of returns to their r d investments

learning and climate feedbacks optimal climate insurance and fat tails we study the effect of potentially severe climate change on optimal climate change policy accounting for learning and uncertainty in the climate system in particular we test how fat upper tailed uncertainty over the temperature change from a doubling of greenhouse gases the climate sensitivity affects economic growth and emissions policy in addition we examine whether and how fast uncertainties could be diminished through bayesian learning our results indicate that while overall learning is slow the mass of the fat tail diminishes quickly since observations near the mean provide evidence against fat tails we denote as partial learning the case where the planner rejects high values of the climate sensitivity with high confidence even though significant uncertainty remains fat tailed uncertainty without learning reduces current emissions by 38 relative to certainty indicating significant climate insurance or paying to limit emissions today to reduce the risk of very high temperature changes is optimal however learning reduces climate insurance by about 50 the optimal abatement policy is strongly influenced by the current state of knowledge even though greenhouse gas ghg emissions are difficult to reverse non fat tailed uncertainty is largely irrelevant for optimal emissions policy

intergenerational earnings mobility inequality and growth abstract we examine a model in which per capita income inequality intergenerational mobility and returns to education are all determined endogenously individuals earn wages depending on their ability which is a random variable they purchase an education with transfers received from their parents and are subject to liquidity constraints in the model multiple steady state equilibria are possible countries with identical tastes and technologies can reach differing rates of mobility inequality and per capita income equilibria with higher levels of output also have lower inequality higher mobility and more efficient distribution of education

wage functions and occupational selection in a rural less developed country setting economists are just beginning to develop empirical knowledge about the basic relationships that determine the distribution of incomes and allocation of resources in the poor rural regions of the world understanding interactions between agriculture and the rest of the economy is particularly important in this context this paper empirically investigates the allocation of human resources between farm work and other jobs and the compensation received by individuals for their work in agriculture and elsewhere specifically two related tasks are undertaken in this paper 1 the estimation of wage functions and 2 the estimation of functions determining the allocation of time among occupations there have been a series of papers which estimate the earnings function using data from poor countries for examples see blaug 1974 chiswick 1977 and valdes 1971 however this study focuses not on total earnings but on the wage rates a person may earn in labor market work because the wage rate is the relevant price of time for many allocative decisions for example in dividing the work year between self employed farming and work as an employee off the farm a key price is the potential wage rate the person can earn in the labor market for discussion and evidence on this issue see sumner 1978 recently a few studies have appeared which illustrate the importance of understanding potential wage variations across individuals in less developed countries rosenzweig 1978 uses wage estimates from aggregate indian data in a model determining the impact of land reform bardhan 1979 develops wage functions from a sample survey in rural india as a step in estimating labor supply for rural households kusnic and davanzo 1980 use wage functions to impute potential incomes and to measure the full income distribution these previous studies illustrate the importance of understanding the determinants of market wages the present paper develops wage functions in more detail focusing especially on industrial differentials in many rural areas employment opportunities may be usefully categorized into 1 self employment mainly on small farms 2 work for wages on large farms and 3 work for wages in non farm industries the combination of selfemployment and work as an employee is also important in many rural areas in both rich and poor countries this paper examines the impact of personal characteristics on the choice to participate in work for wages and on the choice of industry these estimates also form a basis for studying industrial wage differentials tentative estimates of the dependence of participation on expected wages are also presented below the empirical analysis in this paper is based on a 1974 sample of five villages in central guatemala see corona 1978 and stein 1978 one village petapa is larger richer and more urban than the others it lies south of guatemala city within commuting distance of the capital the other villages are outside the capital city region the population sampled is almost exclusively ladino spanish culture as opposed to indian data are available on the earnings hours of work industry age schooling literacy and village of 1 005 male heads of households approximately one third of the sample work as both self employed farmers and hired workers and most of these men work on fincas large plantations another quarter of the sample work as self employed farmers and do no work for wages the suburban village has mostly nonagricultural workers whereas the four other villages have predominantly farmers and farm employees in received for publication june 21 1979 revision accepted for publication december 31 1980 north carolina state university research on this paper began while i was a rockefeller foundation supported post doctoral fellow in the labor and population group of the economics department of the rand corporation and continued at north carolina state university supported by the agricultural research service at rand robert newman served as my research assistant and at n c state james cochell provided able assistance i have benefited from the comments of colleagues at both institutions and from members of the labor economics workshop at the university of north carolina at chapel hill i also thank two anonymous referees for useful suggestions this is paper number 6558 of the journal series of the north carolina agricultural research service raleigh n c

the effects of public sector hiring and compensation policies on the egyptian labor market this article examines the combined impact of the employment guarantee for graduates and public sector compensation policies on the egyptian labor market besides contributing to an unsustainable rate of growth in the government labor force these policies have encouraged queuing for government jobs contributed to high graduate unemployment rates and reduced the employment of graduates in the private sector despite substantial wage erosion in the public sector in recent years government wages when appropriately corrected for observed heterogeneity and sample selection are on a par with or higher than private sector wages especially for graduates when combined with the more desirable nonwage aspects of government jobs these compensation levels explain the attractiveness of public sector employment to graduates government pay scales are especially advantageous to female secondary school graduates who appear to face considerable discrimination in the private sector

private eradication of mobile public bads we consider analytically the non cooperative behavior of many private property owners who each controls the stock of a public bad such as an invasive weed species infectious disease fire or agricultural pest the stock of the public bad can grow and disperse across a spatial domain of arbitrary size in this setting we characterize the conditions under which private property owners will control or eradicate and determine how this decision depends on property specific environmental features and on the behavior of other landowners we show that high mobility or lower control by others result in lower private control but when the marginal dynamic cost of the bad is sufficiently large we find that complete eradication may be privately optimal despite the lack of consideration of others welfare in these cases eradication arises in the non cooperative game and is also socially optimal so there is in effect no externality finally when property harboring the bad is not owned or is owned in common we derive the side payments required to efficiently control the mobile public bad

controlling households drilling fever in france an economic modeling approach using primary data collected at the national and local levels in france this paper shows how water price increase initially intended to generate environmental benefits through reducing water use has produced economic incentives for households to drill their own garden boreholes the paper first presents the results of a national survey which identifies the increasing number of garden boreholes as an issue of concern in a majority of the french counties it then presents a microeconomic model which represents the households decision to construct a borehole the model is used to simulate the impact of various water pricing scenarios on tube well development and residential water demand at regional level the paper ends with a discussion of the social impact of emerging independent supply strategies

determinants of residential water demand in germany abstract we econometrically analyze the impact of several economic environmental and social determinants for the per capita demand for water in about 600 water supply areas in germany besides prices income and household size we consider the effects of population age the share of wells housing patterns precipitation and temperature we also explore why current per capita residential water consumption in the new federal states is about 30 lower than in the old federal states since average cost pricing may cause an endogeneity problem we apply instrumental variable procedures in addition to single equation ordinary least squares but find no evidence that prices are endogenous our estimation results suggest that the price elasticity of water demand in germany is around 0 24 the income elasticity is positive decreases with higher income levels and is at least three times higher in the new federal states than in the old federal states current differences in prices and income levels explain about one third of the gap in residential water use between the two regions household size and the share of wells have a negative impact on per capita water demand and water use increases with age finally the findings provide some evidence that rainfall patterns rather than total rainfall affect water consumption while temperature appears to have no impact at all all outcomes are robust to a log log and two types of semi log specifications for the water demand function

determining the social cost of carbon under damage and climate sensitivity uncertainty this article quantifies the impact on optimal climate policy of both damage elasticity and equilibrium climate sensitivity uncertainty under separable preferences for risk and intergenerational inequality the primary findings are as follows 1 such preferences can depress the social cost of carbon scc when calibration aims at matching actual economic outcomes countering the prevailing view that the scc is greater with separable than with conventional entangled preferences 2 damage elasticity uncertainty has larger effects on climate policy than equilibrium climate sensitivity uncertainty even under high impact tail risk of the latter 3 risk aversion decisively strengthens optimal climate policy under joint damage and climate sensitivity uncertainty than with a single source of uncertainty alone indeed failing to account for the interaction between damage and climate sensitivity uncertainty underestimates the cost of climate change by more than us dollars 1 trillion

gary becker s contributions to economics from his first published work gary becker has consistently strived to extend the domain of economic analysis his interest is in social science broadly defined and he is convinced that economic theory in its established neoclassical form provides the best set of tools for analysing social science questions when he finds an interesting problem on the borderland of what is conventionally thought of as economics and that is where he is looking for his problems he is not worried that he is trespassing on the traditional grounds of sociologists political scientists lawyers anthropologists or biologists on the contrary he clearly delights in showing how economic theory can be brought to bear on such problems he is of course not alone in trying to extend the borders of economics many other scholars have contributed to the movement which some have characterized as economic imperialism becker is one of the most outstanding of the imperialists this review of his work is organized in accordance with the main topics on which becker has worked chronologically his work on the economics of discrimination which grew out of his doctoral dissertation comes first next in order come his fundamental contributions to human capital theory he was also one of the founders of the so called new theory of consumption which is no longer so new and he has made important contributions to the economic study of crime and punishment and to the economics of political decision making some of his most original work is in the economics of the family where he provides economic explanations of such questions as marriage divorce and procreation after the topic by topic review of becker s contributions i will try to provide a more general evaluation of his work and to characterize it more fully in terms of research traditions and methodological attitudes

decomposing the gender gap in cognitive skills in a poor rural economy girls lag markedly behind boys in education in many developing countries which may slow economic growth and increase inequity this paper uses indicators of the output of the education production process cognitive skills to characterize and to investigate the determinants of the large educational gender gap in rural pakistan local school availability accounts for about a third of the total cognitive achievement gender gap and over two fifths of that in numeracy which implies that policies that increased local school availability for girls could reduce substantially the gender gaps in cognitive skills to further reduce these gender gaps will require policies that focus on the demand side of the market where our results suggest the response to modest changes in incentives may be high

a 4 stated dice quantitatively addressing uncertainty effects in climate change we introduce a version of the dice 2007 model designed for uncertainty analysis dice is a wide spread deterministic integrated assessment model of climate change climate change long term economic development and their interactions are highly uncertain the quantitative analysis of optimal mitigation policy under uncertainty requires a recursive dynamic programming implementation of integrated assessment models such implementations are subject to the curse of dimensionality every increase in the dimension of the state space is paid for by a combination of exponentially increasing processor time lower quality of the value or policy function approximations and reductions of the uncertainty domain the paper promotes a state reduced recursive dynamic programming implementation of the dice 2007 model we achieve the reduction by simplifying the carbon cycle and the temperature delay equations we compare our model s performance and that of the dice model to the scientific aogcm models emulated by magicc 6 0 and find that our simplified model performs equally well as the original dice model our implementation solves the infinite planning horizon problem in an arbitrary time step the paper is the first to carefully analyze the quality of the value function approximation using two different types of basis functions and systematically varying the dimension of the basis we present the closed form continuous time approximation to the exogenous discretely and inductively defined processes in dice and we present a numerically more efficient re normalized bellman equation that in addition can disentangle risk attitude from the propensity to smooth consumption over time

changes in the returns to education in costa rica abstract i document patterns in the returns to education in costa rica from 1976 to 1992 the most important change during this period was that from the late 1970s to the mid 1980s the return to education fell by about one fourth i construct demand and supply indices within a fixed manpower requirements framework to estimate demand and supply shifts i find a significantly positive relationship between measures of demand for education and a significantly negative relationship between measures of supply for education these findings suggest that calculations based on the returns to education such as the returns to social investments in education must take into account future changes in the returns to education as supply and demand conditions develop

incentives allocation and labour market reforms during transition the case of urban china 1986 1990 has the reform process in china resulted in the introduction of incentives directed at a more efficient allocation of resources using data on individual earnings in urban liaoning province for the period 1986 1990 and a wage equation approach we address this issue in the context of labour market reforms focusing specifically on returns to education our results indicate that failure to address the issue of endogenous selection of more able individuals into state owned enterprises soes can severely bias returns downwards unlike in soes returns in collective owned enterprises coes increased the latter having been allowed to grow out of the plan more quickly and subject to more competition in factor and product markets we conclude that decentralization without competition is unlikely to result in the introduction of an efficient incentive mechanism the more administratively determined regular wages are one avenue for increased returns we find evidence of differentiated bonuses in coes but

taxes and quotas for a stock pollutant with multiplicative uncertainty we compare taxes and quotas when firms and the regulator have asymmetric information about the slope of firms abatement costs damages are caused by a stock pollutant we calibrate the model using cost and damage estimates of greenhouse gasses taxes dominate quotas as with additive uncertainty this model with multiplicative uncertainty allows us to compare expected stock levels under the two policies and to investigate the importance of stock size and the magnitude of uncertainty on the policy ranking

asymmetries in the union wage premium in ghana the article uses a matched employer employee data set for ghana and adopts a quantile regression approach that allows the effects of unionization to vary across the conditional wage distribution it is shown that if there are intrafirm differences in unionization there does appear to be a premium among poorer paid workers in the formal sector although this cannot be given a causal interpretation it suggests important issues about how unions may affect one part of the labor market

emissions targets and the real business cycle intensity targets versus caps or taxes for reducing greenhouse gas emissions intensity targets are attracting interest as a flexible mechanism that would better allow for economic growth than emissions caps for the same expected emissions however the economic responses to unexpected productivity shocks differ using a real business cycle model we find that a cap dampens the effects of productivity shocks in the economy on all variables except for the shadow value of the emissions constraint an emissions tax leads to the same expected outcomes as a cap but with greater volatility certainty equivalent intensity targets maintain higher levels of labor capital and output than other policies with lower expected costs and no more volatility than with no policy

why do diplomas pay an expanded mincerian framework applied to mexico we compare four explanations for the value of diplomas each of which has implications for unemployment and wage variation amongst graduates most of which have not previously been tested for when seeking to explain the effects of diplomas we test for these implications using a refined econometric framework exploiting idiosyncrasies in mexican labour market and educational institutions premiums in mexico appear to result from diplomas tied to jobs with downwards rigid wages an uncommon but simple explanation the standard explanations including screening are not suggested by mexican data our results illuminate how labour markets segmented by diplomas clear this depends upon the nature of the labour market rigidities exactly as predicted by neoclassical theory

poverty and the political economy of public education spending evidence from brazil a large body of literature has emphasized the elite capture of democratic institutions as the explanation for the low levels of spending on public education in many low income democracies this paper provides an alternative to that longstanding hypothesis motivated by new cross country facts and evidence from brazilian municipalities we hypothesize that many democratic developing countries might invest less in public education spending because poor decisive voters prefer the government to allocate resources elsewhere one possible explanation is that low income voters could instead favor redistributive programs that increase their incomes in the short run such as cash transfers to test for this possibility we design and implement an experimental survey and an incentivized choice experiment in brazil the findings from both interventions support our hypothesis

price and income elasticities of residential water demand a meta analysis this article presents a meta analysis of variations in price and income elasticities of residential water demand meta analysis constitutes an adequate tool to synthesize research results by means of an analysis of the variation in empirical estimates reported in the literature we link the variation in estimated elasticities to differences in theoretical microeconomic choice approaches differences in spatial and temporal dynamics as well as differences in research design of the underlying studies the occurrence of increasing or decreasing block rate systems turns out to be important with respect to price elasticities the use of the discrete continuous choice approach is relevant in explaining observed differences

heterogeneity in returns to schooling econometric evidence from ethiopia this paper investigates whether returns to schooling in ethiopia vary across the wage distribution of individuals to do so it adopts an instrumental variables quantile regression framework that allows for both endogeneity of schooling resulting from unmeasured ability and possible heterogeneity in the impact of schooling the empirical estimates indicate that education contributes more to the earnings of individuals at a lower end of the income distribution

unions and efficient training the paper examines the optimal level of training investment when trained workers are mobile wage contracts are time consistent and training comprises both specific and general skills the firm has ex post monopsonistic power that drives trained workers wages below the social optimum the emergence of a trade union bargaining at the firm level can increase social welfare by counterbalancing the firm s ex post monopsonistic power in wage determination local union firm wage bargaining ensures that the post training wage is set sufficiently high to deter at least some quits so that the number of workers the firm trains is nearer the social optimum

bayesian learning growth and pollution abstract environmental problems such as climate change have great uncertainties current expectations are that uncertainties about climate change will be resolved quickly we examine this hypothesis theoretically and computationally we consider bayesian learning about the relationship between greenhouse gas levels and global mean temperature changes a key uncertainty learning is non trivial because of a stochastic shock to the realized temperature we find theoretically the expected learning time which is related to the variance of the shock and the emissions policy implying a tradeoff between the benefits of controlling emissions and information we imbed the learning model into an optimal growth model with a climate sector and solve the resulting dynamic program we find computationally that learning takes on average over 90 yr far longer than currently believed

risks and rewards gary becker s contributions to economics gary becker is one of the most original and influential economists of our age his originality lies in extending the frontiers of economics and broadening the range of important social science problems that are amenable to economic analysis he has gone against the grain of establishment thinking in the economics profession invariably choosing to work on problems that were considered beyond the boundaries of modem economics yet this work made close contact with many of the great economists of the past and many of the concepts he invented and developed are now widely if not routinely used in modem economics several of the approaches to problems he pioneered have evolved into fields and specialities in their own right that becker has had an immense intellectual impact and influence in the economics profession is supported empirically by the voluminous citations to his work over the years and in other ways obviously citation counts have well known difficulties and cannot prove anything by themselves but if used in conjunction with more fundamental evidence they do have the virtue of being quantifiable marshall medoff s 1989 1 recent citation study is one of the best available because citations are weighted by the importance of the journals in which articles appear among non nobel prize economists working in u s universities under 65 years of age becker ranks first in total citations over the 1971 85 period to which medoff s study refers and he is first by a very wide margin though the study is limited to economists in the united states it is clear that becker would rank at or very close to the top of any worldwide list furthermore becker s work is virtually all substantive economic analysis hardly any of it is devoted to the development of methodological tools or to surveys both of which gamer citations more easily and many concepts

education experience and earnings in the labor market of a developing economy the case of urban khartoum abstract this paper examines the relevance of the human capital approach to explaining the variance in workers productivity and earnings in the labor market or urban khartoum the analysis produces two principal findings first the rate of return to education in sudan is relatively low compared with the rate of return in other developing countries perhaps a reflection of poor quality of education in the sudan second while returns to primary education are lower than average returns to college education are higher this creates an interesting paradox because the sudan educates a higher percentage of children at the secondary and tertiary levels than most sub saharan african countries the most likely explanation is that the emigration of skilled manpower to other arab states combined with an influx of unskilled labor into khartoum has created a situation where skilled manpower is relatively scarce the paper also examines the temporal relationship between education and the labor market and identifies how sudan s rapid expansion of the education system has led to the filtering down of the educational qualifications and job competition a process that may well stimulate dynamic growth throughout the economy

education employment and earnings of secondary school and university leavers in tanzania evidence from a tracer study this study uses a tracer survey of secondary school completers in tanzania to analyse the impact of educational qualifications on labour market earnings we show that the rates of return to the highest educational qualifications for wage employees are not negligible and at the margin provide an investment incentive however we find little evidence of human capital effects in the earnings determination process for the self employment sector introducing controls for father s educational background and a set of school fixed effects designed to proxy for school quality and potential labour market network effects reduces the estimated rates of return to educational qualifications a comparison of our results with the available evidence from other countries in the region suggest that despite an extremely small secondary and university education system the private rates of return to education in the tanzanian wage employment sector are comparatively low

do unions impede or accelerate structural adjustment industrial versus company unions in an industrialising labour market trades unions potentially have both beneficial and adverse effects for workers and for employing enterprises in recent supply side structural adjustment strategies particularly in developing countries it has been widely presumed that unions have adverse effects and constitute a major source of market distortion and labor market rigidity this paper based on a survey of nearly 3 000 industrial enterprises in malaysia examines this proposition empirically considering a wide range of possible effects it considers whether workers and or employers should prefer to avoid unions or to have independent industrial unions or company unions copyright 1992 by oxford university press

labor unions and the distribution of wages and employment in south africa few countries have higher wage inequality than south africa where wages of african and white workers differ by a factor of five using survey data collected in 1993 the authors analyze the complex effect of unions on this wage gap among male african workers in the bottom decile of the wage distribution union membership was associated with wages that were 145 higher than those of comparable nonunion workers and among those in the top decile the differential was 19 regression estimates also indicate that returns to observed productive characteristics of workers such as education and experience were larger for nonunion than union workers if the large union relative wage effect were cut in half the authors estimate that employment of african youth age 16 29 would increase by two percentage points and their labor force participation rate would also increase substantially

optimal climate change mitigation under long term growth uncertainty stochastic integrated assessment and analytic findings abstract economic growth over the coming centuries is one of the major determinants of today s optimal greenhouse gas mitigation policy at the same time long run economic growth is highly uncertain this paper is the first to evaluate optimal mitigation policy under long term growth uncertainty in a stochastic integrated assessment model of climate change the sign and magnitude of the impact depend on preference characteristics and on how damages scale with production we explain the different mechanisms driving optimal mitigation under certain growth under uncertain technological progress in the discounted expected utility model and under uncertain technological progress in a more comprehensive asset pricing model based on epstein zin weil preferences in the latter framework the dominating uncertainty impact has the opposite sign of a deterministic growth impact the sign switch results from an endogenous pessimism weighting all of our numeric scenarios use a dice based assessment model and find a higher optimal carbon tax than the deterministic dice base case calibration

the climate change learning curve abstract the purpose of this paper is to confront economic models of climate change with the reality that limited information exists with which to form expectations about the evolution of the climate a key element in the tension between those who believe we should impose aggressive climate change mitigation policies and those who do not is the question of if we are merely in a long period of shock induced above average temperatures or if observed increases in temperature are a result of carbon emissions this paper characterizes learning dynamics resulting from the use of observations of temperature to update beliefs about two key characteristics of global climate the persistence of natural trends and the sensitivity of temperature to atmospheric carbon levels this paper shows that contrary to predictions in the literature that uncertainty may be resolved very quickly the time to learn the true processes may be in the order of thousands of years further this paper shows the effects of uncertainty on the likelihood that observations from the statistical record lead to important estimate and policy errors

wage inequality and the distribution of education abstract this paper analyzes the relationship between education and wage inequality in metropolitan brazil the study is based on data from ten brazilian annual household surveys pnads which are available for the period 1976 1986 the universe of analysis is limited to occupied prime age males the inequality measure used was theil s second measure which is analytically convenient for a study of the determinants of inequality it is shown that there exist sharp differences in wage inequality across metropolitan areas to identify whether these large regional differences in inequality are directly associated with differences in educational levels or with differences in the steepness of the wage education profiles some simulations are conducted the results indicate that regional differences in the distribution of education are not able to explain much of the regional differences in wage inequality as a matter of fact the differences in wage inequality were shown to be intrinsically associated with differences in the steepness of the wage education profiles

wage structure as implicit insurance on human capital in developed versus underdeveloped countries abstract this paper explores the role of wage structure as implicit insurance on human capital it illustrates how smaller wage differentials in the developed world can be welfare enhancing by acting as implicit insurance while larger wage differentials in underdeveloped countries make investments in human capital riskier in other words with smaller wage differentials the students in a developed country are insured against poor educational outcomes through the existence of well paid alternative employments which are not present in the economy of a less developed country this result arises as multiple equilibria in a general equilibrium model when there are no insurance markets for human capital

schooling and earnings distributions with endogenous labour force participation marital status and family size this paper investigates the impact of various schooling investment strategies on family and per capita earnings within a framework that integrates effects on earnings family size marital status and labour force participation data are from a 1977 1978 survey of urban nicaraguan women aged 15 45 excerpt

education earnings and the canadian g i bill canadian second world war veterans benefited from an extensive educational pro gram similar to the u s g i bill because of differences in military enlistment rates how ever a much lower fraction of quebec men were eligible for these benefits than men from other provinces building on this fact we analyse inter cohort patterns of education and earnings for english speaking men from ontario using french speaking men from quebec as a control group we find that the instrumental variables estimates of the return to school ing are typically as big or bigger than the corresponding ols estimates jel classification j24 i21

credit constraints and human capital accumulation in the open economy abstract this paper analyzes the implications of capital market imperfections for understanding the causes and consequences of international trade credit constraints in financing education and exogenous income distribution affect patterns of comparative advantage and are crucial in determining the impact of international trade unlike the standard results in the trade literature in the model here trade liberalization in a skill scarce country leads to higher investments in human capital

government intervention efficiency wages and the employer size wage effect in zimbabwe abstract this paper uses matched employer employee data from a survey of 201 manufacturing firms and 1609 of their workers conducted in zimbabwe in the summer of 1993 the results indicate that there is a substantial premium associated with employment in larger firms and that this premium cannot be explained by differences in worker quality and job characteristics nor is it eliminated by controlling for unionization minimum wages or other forms of government intervention the size premium is much larger for white collar than for blue collar workers these differentials are also found to be substantially larger than those estimated for other developed and developing countries the analysis uses the data about firm characteristics to explore a number of efficiency wage based explanations of the size differential and finds results which are consistent with but not conclusive proof of hiring turnover and morale based notions of efficiency wages

distribution and growth cross country evidence an endogenous growth model is presented to examine the determinants of economic growth and income distribution and their relationship three major findings from a cross country analysis of 45 countries are 1 a higher level of educational attainment of the labour force has an equalizing effect on income distribution while the larger the dispersion of schooling among the labour force the greater the income inequality 2 human capital investment as well as physical capital investment are significant factors contributing to economic growth and 3 income inequality has a negative effect on economic growth supporting the existence of a complementary relationship between equity and growth

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