can falling supply explain the rising return to college for younger men a cohort based analysis although the college high school wage gap for younger u s men has doubled over the past 30 years the gap for older men has remained nearly constant in the united kingdom and canada the college high school wage gap also increased for younger relative to older men using a model with imperfect substitution between similarly educated workers in different age groups we argue that these shifts reflect changes in the relative supply of highly educated workers across age groups the driving force behind these changes is the slowdown in the rate of growth of educational attainment that began with cohorts born in the early 1950s in all three countries

who receives the college wage premium assessing the labor market returns to degrees and college transfer patterns using data from the 1979 national longitudinal survey of youth we estimate wage models in which college educated workers are classified according to their degree attainment college type and college transfer status the detailed taxonomy produces modest improvements in explanatory power relative to standard specifications and reveals considerable heterogeneity in the predicted wages of college educated workers we find that transfer students receive an indirect wage benefit insofar as changing colleges allows them to earn a degree some transfer students receive an additional direct wage benefit presumably because switching schools increases their skill investment opportunities

explaining cross cohort differences in life cycle earnings abstract college educated workers entering the labor market in 1940 experienced a 4 fold increase in their labor earnings between the ages of 25 and 55 in contrast the increase was 2 6 fold for those entering the market in 1980 for workers without a college education these figures are 3 6 fold and 1 5 fold respectively why are earnings profiles flatter for recent cohorts we build a parsimonious model of schooling and human capital accumulation on the job and calibrate it to earnings statistics of workers from the 1940 cohort the model accounts for 99 of the flattening of earnings profiles for workers with a college education between the 1940 and the 1980 cohorts 52 for workers without a college education the flattening in our model results from a single exogenous factor the increasing price of skills the higher skill price induces i higher college enrollment for recent cohorts and thus a change in the educational composition of workers and ii higher human capital at the start of work life for college educated workers in the recent cohorts which implies lower earnings growth over the life cycle

immigration and poverty in the united states in this paper we assess the likely contribution of immigration over the past three and a half decades to poverty in the u s we first document trends in poverty rates among the native born by race and ethnicity and poverty trends among all immigrants recent immigrants and immigrants by their region and in some instances country of origin next we assess how poverty rates among immigrants change with time in the united states finally we simulate the effects of competition with immigrant labor on native wages and the likely consequent effects on native poverty rates we find that international immigration to the u s between 1970 and 2005 has increased the overall poverty rate due to the facts that immigrants are more likely to be poor and that an increasing proportion of the u s resident population that is foreign born this effect however is modest it increases u s poverty rates by half a percentage point and transitory as immigrant poverty rates decline quickly with time in the u s our wage simulations indicate that competition with immigrants does adversely impact those natives and only those natives with the least education however the impact of wage competition with immigrants on native poverty rates is negligible

class size education and wages we use micro data for england and wales to examine the effects of class size on the decision to stay on in full time schooling at 16 and on wages later in life we find that class size has a sizeable and significant effect on the decision to stay on this finding is very robust wage equations show the effect of staying on is significantly positive for wages combining this with the effect of class size on the staying on decision reveals that class size significantly affects future wages reduced form models lead to much less accurate and insignificant estimates

changes in returns to education in latin america the role of demand and supply of skills using micro data for the urban areas of argentina brazil chile colombia and mexico the authors document trends in men s returns to education during the 1980s and the 1990s and estimate the role of supply and demand factors in explaining the changes in skill premia they propose a model of demand for skills with three production inputs corresponding to workers with primary secondary and university level education further the authors demonstrate that an unprecedented rise in the supply of workers having completed secondary level education depressed their wages relative to workers with primary level education throughout latin america this supply shift was compounded by a generalized shift in the demand for workers with tertiary education

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

wages and human capital in the u s financial industry 1909 2006 we study the allocation and compensation of human capital in the u s finance industry over the past century across time space and subsectors we find that financial deregulation is associated with skill intensity job complexity and high wages for finance employees all three measures are high before 1935 and after 1980 but not in the interim period workers in the finance industry earn the same education adjusted wages as other workers until 1990 and significantly more afterward by 2006 the premium is 40 on average and 200 for top earners and ceos earnings risk and firm size effects account for some of the premium but the majority does not appear to be sustainable

occupations fields of study and returns to education this paper considers several possible channels behind the well documented effect of education on earnings the first channel is that education makes workers more productive on a given task as in a conventional human capital framework the second channel is based on the idea that education helps workers get assigned to higher paying occupations where output is more sensitive to skill a third and final channel is that workers are more productive and earn more when they are matched to a job related to their field of study using data from the 2005 national graduate survey and the 2006 canadian census i find that channels two and three account for close to half of the conventionally measured return to education the results indicate that the return to education varies greatly depending on occupation field of study and the match between these two factors

can the scala mobile explain the fall and rise of earnings inequality in italy a semiparametric analysis 1977 1993 this article uses survey of households income and wealth microdata to investigate the role the scala mobile played in the initial fall and subsequent rise in earnings inequality in italy between 1977 and 1993 the scala mobile was a wage indexation mechanism granting the same absolute wage increase to all employees as prices rose thereby potentially compressing wage differentials over time the potential equalizing effect of this mechanism fell this article argues that the rise in inequality from the mid 1980s was a response to the compression of differentials operated over the previous years by the scala mobile

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

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

games parents and adolescents play risky behaviors parental reputation and strategic transfers this article examines parental reputation formation in intra familial interactions in a repeated two stage game children decide whether to drop out of high school or daughters decide whether to have births as teens and parents then decide whether to provide support to their children beyond age 18 drawing on milgrom and roberts 1982 and kreps and wilson 1982 we show that under certain conditions parents have the incentive to penalise older children for their adolescent risk taking behaviour in order to dissuade their younger children from such behaviour when reaching adolescence we find evidence in favour of this parental reputation model

spend it like beckham inequality and redistribution in the uk 1983 2004 a main activity of the state is to redistribute resources standard political economy models predict that a rise in inequality will lead to more redistribution this paper shows that for the uk in the period 1983 2004 a plausibly exogenous rise in income inequality has not been associated with increased redistribution we explore this example of the paradox of redistribution using attitudinal data we show that standard political economy models of the individual demand for redistribution do have explanatory power but that other attitudes and beliefs are also very important moreover these attitudes and beliefs change quite quickly so are very important in explaining variation in the demand for redistribution

when labor s lost health family life incarceration and education in a time of declining economic opportunity for low skilled men the economic progress of us men has stagnated in recent decades the labor force participation rate of men ages 25 54 peaked in the mid 1960s and has declined since then according to the bureau of labor statistics while men s real median earnings have been flat since the early 1970s these population averages mask considerably larger declines in participation among less educated and non white men as well as substantial increases in wage inequality in this paper we seek to illuminate the broader context in which prime age men are experiencing economic stagnation we explore changes for prime age men over time in education mortality morbidity disability program receipt family structure and incarceration rates we focus on prime age men namely those ages 25 54 and on the years 1980 2016 or 2017 when possible encompassing much of the period of reduced economic progress for low skilled men

going to college to avoid the draft the unintended legacy of the vietnam war between 1965 and 1975 the enrollment rate of college age men in the united states rose and then fell abruptly many contemporary observers e g james davis and kenneth dolbeare 1968 attributed the surge in college attendance to draft avoidance behavior under a policy first introduced in the korean war the selective service issued college deferments to enrolled men that delayed their eligibility for conscription these deferments provided a strong incentive to remain in school for men who wanted to avoid the draft for example the college entry rate of young men rose from 54 percent in 1963 to 62 percent in 1968 the peak year of the draft moreover both the college entry rate and the number of inductions dropped sharply between 1968 and 1973 as the draft was being phased out although these parallel trends are suggestive they do not necessarily prove that draft avoidance raised the education of men who were at risk of service during the vietnam war such an inference requires an explicit specification of the counterfactual what would have happened to schooling outcomes in the absence of the draft in this paper we use trends in enrollment and completed schooling of men relative to those of women to measure the effects of draftavoidance behavior during the vietnam war our maintained hypothesis is that in the absence of gender specific factors such as the draft the relative schooling outcomes of men and women from the same cohort would follow a smooth trend in light of the sharp discontinuity in military induction rates between 1965 and 1970 we look for similar patterns in the relative enrollment rate of men and in the relative college graduation rate of men from cohorts that were at risk of induction during this period

changes in u s wages 1976 2000 ongoing skill bias or major technological change this article examines the determinants of changes in the u s wage structure from 1976 to 2000 our main empirical observation is that changes in both the level of wages and the returns to skill over this period were primarily driven by changes in the ratio of human capital to physical capital we show that this pattern conforms extremely well to a simple model of technological adoption following a major change in technological opportunities in contrast we do not find much empirical support for the view that ongoing factor augmenting skill biased technological progress has been an important driving force over this period

educational opportunity and income inequality affordable higher education is and has been a key element of social policy in the united states with broad bipartisan support financial aid has substantially increased the number of people who complete university generally thought to be a good thing we show however that making education more affordable can increase income inequality the mechanism that drives our results is a combination of credit constraints and the signaling role of education first explored by spence 1973 when borrowing for education is difficult lack of a college education could mean that one is either of low ability or of high ability but with low financial resources when government programs make borrowing easier or tuition more affordable high ability persons become educated and leave the uneducated pool driving down the wage for unskilled workers and raising the skill premium

cross country variation in the impact of international migration canada mexico and the united states using data drawn from the canadian mexican and u s censuses we find a numerically comparable and statistically significant inverse relation between immigrant induced shifts in labor supply and wages in each of the three countries a 10 labor supply shift is associated with a 3 4 opposite signed change in wages despite the similarity in the wage response theimpactofmigrationonthewagestructuredifferssignificantlyacrosscountries international migration narrowed wage inequality in canada increased it in the united states and reduced the relative wage of workers at the bottom of the skill distribution in mexico jel j31 j61

why are the relative wages of immigrants declining a distributional approach the authors show that the decline in the relative wages of immigrants in canada is far from homogeneous across the wage distribution the well documented decline in the mean wage gap between immigrants and canadian born workers hides a much larger decline at the low end of the wage distribution while the gap hardly changed at the top end of the distribution using standard ols regressions and unconditional quantile regressions the authors show that both the changes in the mean wage gap and in the gap at different quantiles are well explained by standard factors such as experience education and country of origin of immigrants interestingly an important source of change in the wages of immigrants relative to the canadian born is the aging of the baby boom generation which has resulted in a relative increase in the labor market experience and thus in the wages of canadian born workers relative to immigrants

structural transformation and the rise of information technology abstract has the emergence of information technology changed the structure of employment and earnings in the us we propose a new index of occupation level it intensity and document several long term changes in the occupational landscape over the past decades using census and us klems micro data we show that i the bulk of productivity growth after 1950 is concentrated in it intensive sectors ii the share of workers in it jobs has expanded significantly with little or no pause and it jobs enjoy a large and growing earnings premium even after controlling for general task requirements e g cognitive non routine and iii the rise of the it intensive employment share is closely associated with declines in the manufacturing employment share while earnings premia for college educated and cognitive non routine workers have flattened in the aggregate since 2000 we show that they continued growing in it intensive jobs and that these jobs have played a key role in accounting for the surge of high tech service labor productivity we also use our it intensity index to estimate industry specific elasticities of substitution between it and non it intensive labor finding values of 1 6 in manufacturing and 1 3 in services finally we revisit a long standing question about the relationship between technological progress and productivity and provide evidence that occupation level it intensity is positively associated with output growth especially in the services sector

what does human capital do a review of goldin and katz s the race between education and technology goldin and katz s the race between education and technology is a monumental achievement that supplies a unified framework for interpreting how the demand and supply of human capital have shaped the distribution of earnings in the u s labor market over the twentieth century this essay reviews the theoretical and conceptual underpinnings of this work and documents the success of goldin and katz s frame work in accounting for numerous broad labor market trends the essay also considers areas where the framework falls short in explaining several key labor market puzzles of recent decades and argues that these shortcomings can potentially be overcome by relaxing the implicit equivalence drawn between workers skills and their job tasks in the conceptual framework on which goldin and katz build the essay argues that allowing for a richer set of interactions between skills and technologies in accomplish ing job tasks both augments and refines the predictions of goldin and katz s approach and suggests an even more important role for human capital in economic growth than indicated by their analysis jel i20 j24 j31 o30

immigration wage effects by origin we estimate the direct partial wage effects of immigrant induced increases in labor supply using the national skill cell approach with longitudinal records drawn from norwegian administrative registers the results show overall negative but heterogeneous wage effects with larger effects on immigrant wages than on native wages and with native wages more responsive to inflows from nordic countries than from developing countries these patterns are consistent with natives and nordic citizens being close substitutes while natives and immigrants from developing countries are imperfect substitutes estimates are sensitive to accounting for effective immigrant experience selective native participation and variation in demand conditions and native labor supply

the impact of immigration on the british labour market using data from the british labour force survey this article provides an empirical investigation of the way immigration affects labour market outcomes of native born workers in britain set beside a theoretical discussion of the underlying economic mechanisms we discuss problems arising in empirical estimation and how to address them we show that the overall skill distribution of immigrants is remarkably similar to that of the native born workforce we find no strong evidence that immigration has overall effects on aggregate employment participation unemployment and wages but some differences according to education

native migrant labour substitution by industry and wage effects evidence from the uk unlike previous studies we estimate the native migrant substitution elasticity nme differentiated by sector to do so we employ a straightforward estimation strategy that consists of adding slo

returns to skills and the college premium a substantial literature documents the evolution of the college premium in the u s labor market over the last 40 years or so there are at least three different interpretations of this fact i shifts in the relative supply of and demand for college versus high school labor ii shifts in the relative supply of and demand for skills in the college versus high school sector and iii composition effects we investigate how each of these components contributes to the dynamics of the college premium and find that all three play a role but the increase in the college premium is primarily driven by the first component we also find that during the 1980s the college premium for high school workers diverged from the college premium for college workers and a substantial fraction of the gap that opens up is primarily due to the increase in the returns to cognitive skills

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

on the macroeconomic and welfare effects of illegal immigration abstract this paper uses a dynamic general equilibrium model with labor market frictions to explore the economic consequences of illegal immigration in the baseline model native workers and illegal foreign workers compete for jobs in the same market but serve as imperfect substitutes in production the calibrated model generates a u shaped relationship between long run domestic consumption and the population share of illegal immigrants after taking into account both consumption and leisure i found that an increase in illegal immigration can generate significant welfare gains for the natives the baseline model is then extended to include heterogeneous workers in the domestic population

the effect of immigration on productivity evidence from us states abstract in this paper we analyze the long run impact of immigration on employment productivity and its skill bias we use the existence of immigrant communities across u s states before 1960 and the distance from the mexican border as instruments for immigration flows we find no evidence that immigrants crowded out employment at the same time we find that immigration had a strong positive association with total factor productivity and a negative association with the high skill bias of production technologies the results are consistent with the idea that immigrants promoted efficient task specialization thus increasing tfp and also promoted the adoption of unskilled efficient technologies

interpreting aggregate wage growth the role of labor market participation a new and easily implementable framework for the empirical analysis of the relationship between aggregate and individual wages is developed aggregate real wages are shown to contain three important bias terms one associated with the dispersion of individual wages a second deriving from compositional changes in the selected sample of workers and a third reflecting the distribution of working hours their importance for interpreting the path of aggregate wages and of the returns to education for recent experience in britain is highlighted a close correspondence between the estimated biases and the patterns of differences shown by aggregate wages is established

age specific dynamic labor demand and human capital investment abstract to study the optimal age specific labor demand and human capital investment at the firm level we extend the standard dynamic labor demand model by introducing age as a second dynamic variable and distinguish between two types of workers low skilled and high skilled applying an age structured optimal control model we derive qualitative features of the optimal age specific hiring and training effort for the case of a linear revenue and production function we prove that firms do not anticipate changes in adjustment costs in their optimal decisions this result no longer holds if a nonlinear revenue or production function is considered

skill premium labor supply and changes in the structure of wages in latin america earnings inequality declined rapidly in argentina brazil and chile during the 2000s a reduction in the experience premium is a fundamental driver of declines in upper tail 90 50 inequality while a decline in the education premium is the primary determinant of the evolution of lower tail 50 10 inequality relative labor supply is important for explaining changes in the skill premiums relative demand trends favored high skilled workers during the 1990s shifting in favor of low skilled workers during the 2000s changes in the minimum wage and more importantly commodity led terms of trade improvements are key factors behind these relative skill demand trends

the impact of immigration on the structure of wages theory and evidence from britain immigration to the uk particularly among more educated workers has risen appreciably over the past 30 years and as such has raised labor supply however studies of the impact of immigration have failed to find any significant effect on the wages of native born workers in the uk this is potentially puzzling since there is evidence that changes in the supply of educated natives have had significant effects on their wages using a pooled time series of british cross sectional micro data on male wages and employment from the mid 1970s to the mid 2000s this paper offers one possible resolution to this puzzle namely that in the uk natives and foreign born workers are imperfect substitutes we show that immigration has primarily reduced the wages of immigrants and in particular of university educated immigrants with little discernable effect on the wages of the native born

the returns to education in thailand a pseudo panel approach summary this study employs the pseudo panel approach for estimating returns to education in thailand while treating the endogeneity bias common to estimates from data on individuals pseudo panel data are constructed from repeated cross sections of thailand s national labor force surveys of workers born during 1946 67 estimates show a downward bias of the returns to education in least squares regressions with individual data a result confirmed with instrumental variable estimation the overall rate of return is between 14 and 16 females have higher returns than males and workers in urban areas have higher returns than those in rural areas

gradual retirement financial incentives and labour supply of older workers evidence from a stated preference analysis abstract using data from a stated preferences experiment in the netherlands we find that replacing full time pension schemes with schemes that offer gradual retirement opportunities induce workers to retire one year later on average total lifetime labour supply however decreases by 3 4 months because the positive effect of delayed retirement on labour supply is cancelled out by a reduction in working hours in the years before full retirement the impact of gradual retirement schemes is however heterogeneous across groups of workers workers in bad health who gain access to gradual retirement postpone their retirement by 1 7 months more than workers in good health this suggests that introduction of gradual retirement alleviates to a certain extent the health related burden that employees in poor health may experience in carrying out their work nevertheless introduction of gradual retirement reduces the total labour supply of both groups of workers financial incentives either in terms of changing pension income or the price of leisure also affect expected retirement age but the impact of these financial incentives does not differ with the possibility of gradual retirement finally we find that gradual retirement is not a preferred option among workers as the large majority prefers full retirement

understanding the evolution of the us wage distribution a theoretical analysis in this paper we propose an analytically tractable overlapping generations model of human capital accumulation and study its implications for the evolution of the us wage distribution from 1970 to 2000 the key feature of the model and the only source of heterogeneity is that individuals differ in theirabilitytoaccumulatehumancapital therefore wageinequalityresultsonlyfromdifferencesin human capital accumulation we examine the response of this model to skill biased technical change sbtc theoretically we show that in response to sbtc the model generates behavior consistent with some prominent trends observed in the us data including i a rise in overall wage inequality both in the short run and long run ii an initial fall in the education premium followed by a strong recovery leading to a higher premium in the long run iii the fact that most of this fall and rise takes place among younger workers iv a rise in within group inequality v stagnation in median wage growth and a slowdown in aggregate labor productivity and vi a rise in consumption inequality that is much smaller than the rise in wage inequality these results suggest that the heterogeneity in the ability to accumulate human capital is an important feature for understanding the effects of sbtc and interpreting the transformation of the us labor markets since the 1970s jel e21 e24 j24 j31

income variance dynamics and heterogeneity recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance in this paper the assumption of i i d income innovations used in previous empirical studies is removed and the focus of the analysis is placed on models for the conditional variance of income shocks which is related to the measure of risk emphasized by the theory we first discriminate amongst various models of earnings determination that separate income shocks into idiosyncratic transitory and permanent components we allow for education and time specific differences in the stochastic process for earnings and for measurement error the conditional variance of the income shocks is modelled as a parsimonious arch process with both observable and unobserved heterogeneity the empirical analysis is conducted on data drawn from the 1967 1992 panel study of income dynamics we find strong evidence of sizeable arch effects as well as evidence of unobserved heterogeneity in the variances

protecting capital from itself u s attempts to regulate the eurocurrency system in 1979 and 1980 the u s government attempted to regulate the eurocurrency system in order to stabilize the international monetary and financial systems and for u s domestic monetary purposes the conflict between the u s government especially the treasury department and the federal reserve board and u s based transnational banks tnbs illustrates tnbs contradictory interests which are neither self evident nor easily discernible even to tnbs themselves the state comes to play a mediating role vis a vis tnbs in an only partially successful attempt to transform contradictory interests into coherent policy resulting in conflict between the state and tnbs the origins of u s regulatory initiatives are rooted in multilateral attempts to supervise banks between 1974 and 1978 and the failure of such coordination during the 1978 dollar crisis from the conflict between u s officials and u s tnbs emerge varying concepts of tnbs interests after examining the reasons for the failure of the u s proposals i conclude by suggesting some implications of tnbs contradictory interests for statist and social conflict theories of the advanced capitalist state few theories of the state have adequately taken into account the complexity and contradictory interests of transnational capital

the impact of immigration why do studies reach such different results we classify the empirical literature on the wage impact of immigration into three groups where studies in the first two groups estimate different relative effects and studies in the third group estimate the total effect of immigration on wages we interpret the estimates obtained from the different approaches through the lens of the canonical model to demonstrate that they are not comparable we then relax two key assumptions in this literature allowing for inelastic and heterogeneous labor supply elasticities of natives and the downgrading of immigrants downgrading occurs when the position of immigrants in the labor market is systematically lower than the position of natives with the same observed education and experience levels downgrading means that immigrants receive lower returns to the same measured skills than natives when these skills are acquired in their country of origin we show that heterogeneous labor supply elasticities if ignored may complicate the interpretation of wage estimates and particularly the interpretation of relative wage effects moreover downgrading may lead to biased estimates in those approaches that estimate relative effects of immigration but not in approaches that estimate total effects we conclude that empirical models that estimate total effects not only answer important policy questions but are also more robust to alternative assumptions than models that estimate relative effects

the penn square bank failure effect on commercial bank security returns a note abstract in this paper we apply standard event methodology to test the effect of the penn square bank failure on the daily returns of three groups of bank holding companies during the 75 day event period upstream banks which had penn square loan participations faced nearly continual declines in daily returns banks in the same economic region followed a pattern of less severe but continuously declining returns while returns for banks outside the region were not significantly affected we conclude that the market viewed the penn square failure as an isolated event which did not significantly affect banks away from regional economic influences

the long run educational cost of world war ii an important component of the long run cost of a war is the loss of human capital suffered by school age children who receive less education austrian and german individuals who were 10 years old during the conflict or were more directly involved through their parents received less education than comparable individuals from nonwar countries such as switzerland and sweden we also show that these individuals experienced a sizable earnings loss some 40 years after the war which can be attributed to the educational loss caused by the conflict the implied consequences in terms of gross domestic product loss are calculated

wage inequality and returns to skill in taiwan 1978 96 since 1980 income inequality has risen faster in taiwan than in the united states inequality rose despite a rapid increase in the share of educated workers in the labour market that might have been expected to depress returns to education returns to a college education rose in taiwan for all but the least experienced college graduates who were the most substitutable by the large new cohorts of college graduates this pattern of changes in relative employment and relative wages is consistent with persistent shifts in relative demand toward skilled labour the shifts are not sector specific as might have been the case if shifts in trade flows were responsible for the shifts in relative wages growth of relative employment of more educated workers occurred in all sectors of the economy consistent with the hypothesis of skill biased technical change these results are similar to findings reported for oecd countries suggesting that taiwan has been exposed to the same types of skill biased shifts in relati

labor market effects of demographic shifts and migration in oecd countries the labor force of each industrial country is being shaped by three forces ageing education and migration drawing on a new database for the oecd countries and a standard analytical framework this paper focuses on the relative and aggregate effects of these three forces on wages across different skill and age groups over 2000 to 2010 the variation in the age and educational structure of the labor force emerges as the dominant influence on wage changes the impact is uniform and egalitarian in almost all countries the changes in the age and skill structure favor the low skilled and hurt the highly skilled across age groups immigration plays a relatively minor role except in a handful of open countries like australia and canada where it accentuates the wage equalizing impact of ageing and education emigration is the only inegalitarian influence especially in ireland and a few eastern european countries which have seen significant outflows of high skilled labor to western european union countries

rethinking the area approach immigrants and the labor market in california abstract a framework that uses a constant elasticity of substitution ces production function with skill differentiation and integrated national labor markets has predictions for the employment effect of immigrants at the local level the employment rather than wage response to immigration by skill in a state reveals the production substitutability complementarity between native and immigrant labor this in turn reveals the degree to which immigrants stimulate or depress the demand for native labor to estimate this elasticity i use a novel instrument based on demographic characteristics of total central american migrants or of the mexican population to predict immigration by skill level within california looking at immigration to california between 1960 and 2005 these estimates support the assumption of a nationally integrated labor market by skill and they support the hypothesis that natives and immigrants in the same education experience group are not perfectly substitutable this explains the counter intuitive fact that there is a zero correlation between immigration and wage and employment outcomes of natives in the state

empirical age earnings profiles the human capital earnings function in which earnings are expressed as a quadratic in potential experience is probably the most widely accepted empirical specification in economics in spite of its widespread acceptance the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience the standard formulation understates early career earnings growth by about 30 50 and overstates midcareer growth by 20 50 however simple alternative specifications that fit the data are available

trends in quality adjusted skill premia in the united states 1960 2000 this paper presents new evidence that increases in college enrollment lead to a decline in the average quality of college graduates between 1960 and 2000 resulting in a decrease of 8 percentage points in the college premium the standard demand and supply framework katz and murphy 1992 card and lemieux 2001 can qualitatively account for the trend in the college and age premia over this period but the quantitative adjustments that need to be made to account for changes in quality are substantial furthermore the standard interpretation of the supply effect can be misleading if the quality of college workers is not controlled for to illustrate the importance of these adjustments we reanalyze the problem studied in card and lemieux 2001 who observe that the rise in the college premium in the 1980s occurred mainly for young workers and attribute this to the differential behavior of the supply of skill between the young and the old our results show that changes in quality are as important as changes in prices to explain the phenomenon they document

immigration and wages evidence from construction to identify relative wage impacts of immigration we make use of certification and licensing requirements in the norwegian construction sector that give rise to exogenous variation in immigrant employment shares across trades individual panel data reveal substantially lower wage growth for workers in trades with rising immigrant employment than for other workers selective attrition from the sector masks the causal wage impact unless accounted for by individual fixed effects for low and semi skilled workers effects of new immigration are comparable for natives and older immigrant cohorts consistent with perfect substitutability between native and immigrant labor within trade finally we present evidence that immigration reduces price inflation as price increases over the sample period were significantly lower in activities with growth in the immigrant share than in activities with no or small change in immigrant employment

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

efficiency gains from liberalizing labor mobility in this paper we quantify the effect of a complete liberalization of cross border migration on the world gdp and its distribution across regions we build a general equilibrium model endogenizing bilateral migration and income disparities between and within countries our calibration strategy uses data on effective and potential migration to identify total migration costs and visa costs by education level data on potential migration reveal that the number of people in the world who have a desire to migrate is around 400 million this number is much smaller than that predicted in previous studies and reflects the existence of high incompressible migration costs in our benchmark framework liberalizing migration increases the world gdp by 11 5 12 5 percent in the medium term our robustness analysis reveals that the gains are always limited in the range of 7 0 percent with schooling externalities to 17 9 percent if network effects are accounted for

the determinants and welfare implications of us workers diverging location choices by skill 1980 2000 abstract from 1980 to 2000 the rise in the us college high school graduate wage gap coincided with increased geographic sorting as college graduates concentrated in high wage high rent cities this paper estimates a structural spatial equilibrium model to determine causes and welfare consequences of this increased skill sorting while local labor demand changes fundamentally caused the increased skill sorting it was further fueled by endogenous increases in amenities within higher skill cities changes in cities wages rents and endogenous amenities increased inequality between high school and college graduates by more than suggested by the increase in the college wage gap alone jel d31 i26 j24 j31 j61 r23

migration and imperfect labor markets theory and cross country evidence from denmark germany and the uk we investigate the labor market effects of immigration in denmark germany and the uk three countries which are characterized by considerable differences in labor market institutions and welfare states institutions such as collective bargaining minimum wages employment protection and unemployment benefits affect the way in which wages respond to labor supply shocks and hence the labor market effects of immigration we employ a wage setting approach which assumes that wages decline with the unemployment rate albeit imperfectly we find that the wage and employment effects of immigration depend on wage flexibility and the composition of the labor supply shock in germany immigration involves only moderate wage but large unemployment effects since immigrants are concentrated in labor market segments with low wage flexibility the reverse is true for the uk and denmark

the labor market impact of immigration in western germany in the 1990 s in this article we estimate the wage and employment effects of recent immigration in western germany using administrative data for the period 1987 2001 and a labor market equilibrium model we find that the substantial immigration of the 1990s had very little adverse effects on native wages and on their employment levels instead it had a sizeable adverse employment effect on previous immigrants as well as a small adverse effect on their wages these asymmetric results are partly driven by a higher degree of substitution between old and new immigrants in the labor market and in part by the rigidity of wages in less than flexible labor markets in a simple counter factual experiment we show that in a world of perfect wage flexibility and no unemployment insurance the wage bill loss of old immigrants would be much smaller

too much investment a problem of endogenous outside options this paper shows that when agents on both sides of the market are heterogeneous varying in their costs of investment ex ante investments by firms and workers or buyers and sellers more generally may be too high when followed by stochastic matching and bargaining over quasi rents the overinvestment is caused by the fact that low cost agents by investing more can increase the value of their outside option and thus shift rent away from high cost investors numerical simulations show that overinvestment can occur given parameter values calibrated to oecd labour markets

cohort effects and the returns to education in west germany using a mincer type wage function we estimate cohort effects in the returns to education for west german workers born between 1925 and 1974 the main problem to be tackled in the specification is to separately identify cohort experience and possibly also age effects in the returns for women we find a large and robust decline in schooling premia in the private sector the returns to a further year of post compulsory education fell from twelve per cent for the 1945 49 cohort to about seven per cent for those born in the early 1970s cohort effects in men s returns to education are less obvious but we do find evidence that they too have declined we conclude by identifying possible reasons for the decline

does education raise productivity or just reflect it education has an important effect on wages but it not clear whether this is because education raises productivity or because education is simply a signal of ability we implement a number of existing tests for discriminating between these two explanations and find that they do not support the signalling hypothesis however we have severe reservations about these results and we propose an alternative test based on changes in education incentives caused by changes in the minimum school leaving age in the 1970s using this idea we find that uk data appear to strongly support the human capital explanation an important issue in the economics of education is that an individual s education has an effect on wages paid in the labour market for example blundell et al 2003 uses detailed education and subsequent earnings information for a cohort of male individuals born in 1958 to estimate that the returns to a uk degree typically of 3 year duration relative to graduating from high school at 18 with 2 a level qualifications a necessary but not sufficient condition for admission to university is a 24 wage premium human capital explanations pioneered by becker 1962 and schultz 1963 suggest that the correlation between education and wages is due to education enhancing productivity however earnings may rise in response to education not because of any effect on productivity but simply because education may act as a signal of productivity employers believing that education is correlated with productivity will screen workers for their education and pay higher wages to the more educated the employers beliefs will be confirmed by their experience if it is the case that high productivity individuals signal this by choosing high levels of education it will be optimal for individuals to behave in this way if the cost of acquiring education is less for high productivity individuals than it is for low productivity individuals thus under reasonable conditions the market will be characterised by a separating equilibrium where higher productivity individuals choose higher levels of education than lower productivity workers and earn correspondingly higher wages the theory is largely due to spence 1973 1979 and the subsequent empirical literature was reviewed by groot and oosterbeek 1994 riley 2001 provides an excellent modern survey chevalier harmon and walker are fellows of iza in bonn and are affiliated with the institute for the study of social change issc in dublin this paper is part of the issc policy evaluation programme chevalier and walker are also affiliated with the centre for the economics of education at the london school of economics lse the support of all of these bodies for facilitating our collaboration is acknowledged harmon is grateful to university college london for their hospitality during his nuffield foundation new career development fellowship in the social sciences comments from steve machin and three anonymous referees greatly improved the exposition of this paper we are also grateful to richard blundell and to seminar participants at the lse and the tinbergen institute in amsterdam for their comments and to vincent o sullivan for excellent research assistance the usual disclaimer applies

on input market frictions and estimation of factors demand in this article we explore the impact of imperfectly competitive input markets on production function estimation first order profit maximizing conditions are altered when frictions in input markets cause the elasticity of input supply to the firm to be finite a consequence of this is that the standard econometric model used for production function estimation will be misspecified we prove that in all nontrivial cases finite elasticities of supply to the firm will lead to inconsistent estimates of production function parameters monte carlo simulations show that the resulting bias can be economically significant

identifying human capital externalities theory with applications the identification of aggregate human capital externalities is still not fully understood the existing mincerian approach confounds positive externalities with wage changes due to a downward sloping demand curve for human capital as a result the mincerian approach yields positive externalities even when wages equal marginal social products we propose an approach that identifies human capital externalities whether or not aggregate demand for human capital slopes downward another advantage of our approach is that it does not require estimates of the individual return to human capital applications to u s cities and states between 1970 and 1990 yield no evidence of significant average schooling externalities copyright 2006 wiley blackwell

exchange rate determination under interest rate rules we propose a theory of exchange rate determination under interest rate rules in a two country model we first show that simple interest rate feedback rules can determine a unique and stable equilibrium without any explicit reaction to the nominal exchange rate we characterize how the behavior of the exchange rate and of the terms of trade depends in a critical way on the monetary regime chosen though not necessarily on monetary shocks we give a simple account of exchange rate volatility in terms of monetary policy rules we provide an explanation of the relation between nominal exchange rate volatility and macroeconomic variability in terms of the monetary regime adopted by monetary authorities

technical change and the demand for skills during the second industrial revolution evidence from the merchant marine 1891 1912 abstract using a large individual level wage data set we examine the impact of a major technological innovation the steam engine on the demand for skills in the merchant shipping industry we find that the technical change created a new demand for engineers a skilled occupation it had a deskilling effect on production work moderately skilled able bodied seamen were replaced by unskilled engine room operatives on the other hand able bodied seamen carpenters and mates employed on steam vessels earned a premium relative to their counterparts on sail vessels and this appears partly related to skill

the college wage premium and the expansion of higher education in the uk this paper reports estimates of the uk college premium for young graduates across successive cohorts from large cross section datasets for the uk pooled from 1994 to 2006 a period when the higher education participation rate increased dramatically the growth in relative labour demand suggests that graduate supply considerably outstripped demand which ought to imply a fall in the premium we find no significant fall for men and even a large but insignificant rise for women quantile regression results reveal a fall in the premium only for men in the bottom quartile of the distribution of unobserved skills

labour market responses to immigration evidence from internal migration driven by weather shocks we study the labour market impact of internal migration in indonesia by instrumenting migrant flows with rainfall shocks at the origin area estimates reveal that a one percentage point increase in the share of migrants decreases income by 0 97 and reduces employment by 0 24 percentage points these effects are different across sectors employment reductions are concentrated in the formal sector while income reduction occurs in the informal sector negative consequences are most pronounced for low skilled natives even though migrants are systematically highly skilled we suggest that the two sector nature of the labour market may explain this pattern

is the new immigration really so bad this article reviews the recent evidence on us immigration focusing on two key questions 1 does immigration reduce the labour market opportunities of less skilled natives 2 have immigrants who arrived after the 1965 immigration reform act been successfully assimilated overall evidence that immigrants have harmed the opportunities of less educated natives is scant on the question of assimilation the success of the us born children of immigrants is a key yardstick by this metric post 1965 immigrants are doing reasonably well even children of the least educated immigrant origin groups have closed most of the education gap with the children of natives

what drives the skill premium technological change or demographic variation abstract this paper quantitatively examines the effects of two exogenous driving forces investment specific technological change istc and the demographic change known as the baby boom and the baby bust on the evolution of the skill premium and the college enrollment rate in the postwar u s economy we develop a general equilibrium overlapping generations model with endogenous discrete schooling choice the production technology features capital skill complementarity as in krusell et al 2000 istc through capital skill complementarity raises the relative demand for skilled labor while demographic variation affects the skill premium by changing the age structure and hence the relative supply of skilled labor we find that istc is the key element driving the skill premium in the postwar u s economy and it is quantitatively important for the dynamics of the college enrollment rate the quantitative importance of the demographic change for the evolution of both the skill premium and the college enrollment rate however is limited

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

spatial changes in labour market inequality abstract we study spatial changes in labour market inequality for us states and msas using census and american community survey data between 1980 and 2010 we report evidence of significant spatial variations in education employment shares and in the college wage premium for us states and msas and show that the pattern of shifts through time has resulted in increased spatial inequality because relative supply of college versus high school educated workers has risen faster at the spatial level in places with higher initial supply levels we also report a strong persistence and increased inequality of spatial relative demand bigger relative demand increases are observed in more technologically advanced states that have experienced faster increases in r d and computer usage and in states where union decline has been fastest finally we show the increased concentration of more educated workers into particular spatial locations and rising spatial wage inequality are important features of labour market polarization as they have resulted in faster employment growth in high skill occupations but also in a higher demand for low wage workers in low skill occupations overall our spatial analysis complements research findings from labour economics on wage inequality trends and from urban economics on agglomeration effects connected to education and technology

the diffusion of computers and the distribution of wages abstract when the costs are decreasing workers adopt technology at the point where the costs equal the increased productivity output per worker increases immediately while productivity benefits increase only gradually if costs continue to fall as a result workers in computer adopting labor market groups experience an immediate fall in wages due to increased supply on the other hand adopting workers experience wage increases with some delay this model explains why increased computer use does not immediately lead to higher wage inequality more specifically the results of the model are shown to be consistent with the question why within group wage inequality among skilled workers as a result of computer technology adoption in the united states increased in the 1970s while between group wage inequality and within group wage inequality among the unskilled did not start to increase until the 1980s the model also predicts that the more compressed german wage structure leads to a lagged diffusion of computer technology along with smaller changes in wage inequality our empirical analysis suggests that this is consistent with the actual developments in germany since the 1980s finally the theoretical predictions seem to be of the right magnitude to explain the empirical quantities observed in the data

returns to education in india summary in india both men and women with more education live in households with greater consumption per capita yet aggregating across age cohorts and states an extra year of education brings male cohorts only 4 more consumption and provides no additional consumption for female cohorts this result is robust to 1 accounting for survey measurement error 2 different measures of household consumption and composition 3 allowing returns to differ by state and school quality and 4 age misreporting the only area with substantial returns is entering into regular wage work which still employs only a small fraction of the population

the impact of immigration on the labor market the literature on the impact of immigration on the labor market is highly controversial the aim of this paper is to review the existing literature and draw some general conclusions on how wages and employment respond to immigration economic studies indicate that the impact of immigration on the average wage and employment of native workers is null or slightly positive however because adjustments take time the immediate labor market effects of unexpected as opposed to expected migration episodes can be detrimental immigration also can have distributional consequences in particular the skill composition of immigrants matters in determining their impact on native labor market outcomes an inflow of immigrants will tend to reduce the wages of competing native workers with skills similar to those of the migrants and increase those of complementary workers with skills that complement those of immigrants by affecting the skill composition of the workforce immigration can create winners and losers among native workers via changes in the wage structure

life cycle earnings education premiums and internal rates of return using norwegian population panel data with nearly career long earnings histories we provide a detailed picture of the causal relationship between schooling and earnings over the life cycle to address selection bias we apply three commonly used identification strategies we find that additional schooling gives higher lifetime earnings and a steeper age earnings profile in line with predictions from human capital theory our preferred estimates imply an internal rate of return of around 11 suggesting that it was highly profitable to acquire additional schooling our analysis reveals that mincer regressions dramatically understate the returns to schooling because key assumptions are violated

the labour market effects of immigration and emigration in oecd countries in this paper we quantify the labor market effects of migration flows in oecd countries during the 1990 s based on a new global database on the bilateral stock of migrants by education level we simulate various outcomes using an aggregate model of labor markets parameterized by a range of estimates from the literature we find that immigration had a positive effect on the wages of less educated natives and it increased or left unchanged the average native wages emigration instead had a negative effect on the wages of less educated native workers and increased inequality within countries

easy come easy go moral hazard in the context of return to education this empirical study advances the understanding of the theory of investment in human capital by outlining limitations to its applicability in the context of return to education the study uses the concept of moral hazard to examine circumstances when financial support for education purpose generates less desirable post graduation incomes this study explores the relationship between financial support and post graduation incomes using data from the survey of income and program participation that is designed to measure the economic situation of individuals results suggest that students are less likely to engage in moral hazardous behavior to the degree to which they are older and to the degree to which they receive costlier financial assistance

immigration and inequality immigration is often viewed as a proximate cause of the rising wage gap between highand low skilled workers nevertheless there is controversy over the appropriate theoretical and empirical framework for measuring the presumed effect and over the precise magnitudes involved this paper offers an overview and synthesis of existing knowledge on the relationship between immigration and inequality focusing on evidence from cross city comparisons in the u s while some researchers have claimed that a cross city research design is inherently flawed i argue that the evidence from cross city comparisons is remarkably consistent with recent findings based on aggregate time series data in particular cross city and aggregate time series comparisons provide support for three key conclusions 1 workers with below high school education are perfect substitutes for those with a high school education 2 high school equivalent and college equivalent workers are imperfect substitutes with an elasticity of substitution on the order of 2 3 within education groups immigrants and natives are imperfect substitutes together these results imply that the average impacts of recent immigrant inflows on the relative wages of u s natives are small the effects on overall wage inequality including natives and immigrants are larger reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives even so immigration accounts for a small share 5 of the increase in u s wage inequality between 1980 and 2000

the price of experience we identify a key role of factor supply driven by demographic changes in shaping several empirical regularities that are a focus of active research in macro and labor economics in particular demographic changes alone can account for the large movements of the return to experience over the last four decades for the differential dynamics of the age premium across education groups emphasized by katz and murphy 1992 for the differential dynamics of the college premium across age groups emphasized by card and lemieux 2001 and for the changes in cross sectional and cohort based life cycle profiles emphasized by kambourov and manovskii 2005 jel d91 e24 i23 j11 j24 j31

immigration and the human capital of natives large low skilled immigration flows influence both the distribution of local school resources and also local relative wages which exert counterbalancing pressures on the local return to schooling i use the national education longitudinal study nels 88 and u s census data to show that low skilled immigration to an area induces local natives to improve their performance in school attain more years of schooling and take jobs that involve communication intensive tasks for which they native english speakers have a comparative advantage these results point out mechanisms that mitigate the potentially negative effect of immigration on natives wages