nep-edu New Economics Papers
on Education
Issue of 2004‒12‒12
twenty-two papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Returns to university education; Evidence from an institutional reform By Dinand Webbink
  2. The Social Shaping of the early Dutch Management Schools - Professions and the power of Abstraction By Baalen, P.J. van; Karsten, L.
  4. Growth, Inequality and Well-Being: Comparisons across Space and Time By Carola Grün; Stephan Klasen
  5. Growth, Inequality, and Well-Being: Intertemporal and Global Comparisons By Carola Grün; Stephan Klasen
  6. Fast Times at Ridgemont High? The Effect of Compulsory Schooling Laws on Teenage Births By Black, Sandra E.; Devereux, Paul J.; Salvanes, Kjell G.
  7. The Transition from Welfare to Work and the Role of Potential Labor Income By Schneider, Hilmar; Uhlendorff, Arne
  8. On the Returns to Training in Portugal By Budría, Santiago; Pereira, Pedro Telhado
  9. Economic Costs of Population Aging. By Frank T. Denton; Byron G. Spencer
  10. Individual Behaviors and Substance Use: The Role of Price By Michael Grossman
  11. An Investigation of the Effects of Alcohol Policies on Youth STDs By Michael Grossman; Robert Kaestner; Sara Markowitz
  12. Socio-Economic Inequalities in Health in Catalonia By Pilar García Gómez; Ángel López
  13. Regulatory Ambivalence and the Limitations of Pharmaceutical Policy in Spain By Joan Costa; Jaume Puig
  14. Poverty, Inequality, and Redistribution Under Lexicographic Social Welfare By Roehlano M. Briones
  15. Effect of a School Finance Reform on Housing Stock and Residential Segregation: Evidence from Proposal A in Michigan By Joydeep Roy
  16. Social Approval and Teenage Childbearing By Anandi Mani; Charles H. Mullin
  17. Exploring the Racial Gap in Infant Mortality Rates, 1920-1970 By William J. Collins; Melissa A. Thomasson
  18. The Labor Market for New Ph.D.s in 2002 By John J. Siegfried; Wendy A. Stock
  19. Crime, Ethics and Occupational Choice: Endogenous Sorting in a Closed Model By John P. Conley; Ping Wang
  20. The Sensitivity of Capital Use to Price in Higher Education By Malcolm Getz; John J. Siegfried
  21. The Impact of Cash Transfers on Child Labor and School Attendance in Brazil By Eliana Cardoso; Andre Portela Souza

  1. By: Dinand Webbink
    Abstract: In 1982, the duration of university education in the Netherlands decreased from five to four years. This institutional reform is exploited for estimating the causal effect of one year of university education on wages in 1997. Wages of employees who enrolled just before or after the reform are compared using data from the Dutch Wage Structure Survey of 1997. <P> We find that the fifth year of university education increased wages with 7 to 9 percent. This wage differential is found for employees enrolling four years before or after the reform. Confounding factors like time-effects, typical age-effects or ability-bias do not seem to bias the main results. <P> The findings suggest that there is scope for increasing private contributions of students. Moreover, the reform may have harmed total welfare. Alternative policies of sticking to five-year duration and increasing private contributions for higher education could have given a more favourable outcome.
    Keywords: learning; education; university education; private returns to university education, natural experiment
    JEL: I2 J24 J31
    Date: 2004–07
  2. By: Baalen, P.J. van; Karsten, L. (Erasmus Research Institute of Management (ERIM), Erasmus University Rotterdam)
    Abstract: In this paper we provide an alternative explanation for the rise of modern management schools at the turn of the 20th century. We argue that these schools were not just responses of the higher education system to the demand of industrializing companies for a new class of professional managers, like Chandler suggests. Based on our historical research we found that the struggle for emancipation of the new professions (engineers and accountants) was the main driver for the founding of these schools. Management schools were viewed as the main vehicles to raise the social status of these new professions. To legitimize their position in the higher education system, abstraction appeared to be the dominant strategy of the professions. By abstraction they could distinguish themselves from the lay public and other professional groups in the domain of management. At the moment the new professions had a foot in the higher education system the engineers and the accountants contested for the new management domain. Abstraction appeared also the successful strategy of the accountants to distinguish themselves from the engineers and to establish a sound base for the development of the Dutch variant of business economics.
    Keywords: Business schools;management education;professions;history of business schools;higher education;
    Date: 2004–12–03
  3. By: Tiago V. de V. Cavalcanti; José Tavares
    Abstract: The secular rise in female labor force participation, highlighted in the recent macroeconomics literature on growth and structural change, has been associated with the declining price and wider availability of home appliances. This paper uses a new and unique country dataset on the price of home appliances to test its impact on female labor supply. We assess the role of the price of appliances in raising participation by comparing it to the impact of fertility and other macroeconomic factors. A decrease in the relative price of appliances - the ratio of the price of appliances to the consumer price index - leads to a substantial and statistically significant increase in female labor force participation. The impact of the price of appliances is quantitatively of the same order of magnitude as that of fertility. This result is robust to the inclusion of additional controls, such as income per capita, government spending, and male and female unemployment rates. To assess causality, we test for exogeneity and use the lagged relative price of appliances and the food price index as instrumental variables, confirming that lower appliance prices lead to increased female participation.
    JEL: O11 J22
    Date: 2004
  4. By: Carola Grün; Stephan Klasen
    Abstract: We use several well-being measures that combine average income with a measure of inequality to undertake international, intertemporal, and global comparisons of well-being. The conclusions emerging from the analysis are that our well-being measures drastically change our impression of levels of well-being of countries. They also significantly affect the ranking of countries, when compared to rankings based on real per capita incomes. These results appear not very sensitive to the data on inequality which this analysis is based upon. However, since the inclusion of inequality has an important impact on well-being comparisons, it is of great importance to generate more consistent and intertemporally as well as internationally comparable data on inequality that are necessary for such comparisons.
    JEL: I31 D63
    Date: 2003–10–07
  5. By: Carola Grün (Department of Economics, University of the Witwatersrand); Stephan Klasen
    Abstract: We use several well-being measures that combine average income with a measure of inequality to undertake intertemporal and global comparisons of well-being. The conclusions emerging from the intertemporal analysis are that the impact of these measures on temporal trends in well-being is relatively small on average, but changing across the decades. In particular, it suggests that changes in well-being were understated in the 1960s and 1970s and overstated in the 1980s and 1990s. Our global analysis covering ca. 81 per cent of the world’s population demonstrates that global well-being is at least 50 per cent smaller than world per capita income if the unequal income distribution is also factored in. Conversely, growth in world well-being has been larger than world income growth between 1970-1998. Since the inclusion of inequality has an important impact on well-being comparisons, it is of great importance to generate more consistent and intertemporally as well as internationally comparable data on inequality.
    JEL: I31 D63
    Date: 2003–11–01
  6. By: Black, Sandra E. (UCLA, NBER and IZA Bonn); Devereux, Paul J. (UCLA and IZA Bonn); Salvanes, Kjell G. (Norwegian School of Economics, Statistics Norway and IZA Bonn)
    Abstract: Research suggests that teenage childbearing adversely affects both the outcomes of the mothers as well as those of their children. We know that low-educated women are more likely to have a teenage birth, but does this imply that policies that increase educational attainment reduce early fertility? This paper investigates whether increasing mandatory educational attainment through compulsory schooling legislation encourages women to delay childbearing. We use variation induced by changes in compulsory schooling laws in both the United States and Norway to estimate the effect in two very different institutional environments. We find evidence that increased compulsory schooling does in fact reduce the incidence of teenage childbearing in both the United States and Norway, and these results are quite robust to various specification checks. Somewhat surprisingly, we also find that the magnitude of these effects is quite similar in the two countries. These results suggest that legislation aimed at improving educational outcomes may have spillover effects onto the fertility decisions of teenagers.
    Keywords: teenage childbearing, education, educational reform
    JEL: I21 J13 J24
    Date: 2004–11
  7. By: Schneider, Hilmar (IZA Bonn and DIW Berlin); Uhlendorff, Arne (DIW Berlin and IZA Bonn)
    Abstract: It is often argued that the high level of welfare claims in Germany causes little incentive for workers with low productivity to seek for a job. We examine the influence of the ratio between estimated potential labor income and the welfare payment level on the probability of leaving social welfare. Using the GSOEP, we estimate a discrete time hazard rate model with competing risks and unobserved heterogeneity. Our results show that the ratio has a positive effect on the probability of leaving social welfare. This effect is especially relevant for households with a potential labor income higher than their welfare payment level.
    Keywords: social welfare, labor supply, duration analysis
    JEL: I38 J64 C41
    Date: 2004–12
  8. By: Budría, Santiago (University of Madeira and CEEAplA); Pereira, Pedro Telhado (University of Madeira, CEPR, CEEAplA and IZA Bonn)
    Abstract: This paper investigates the earnings effects of training in the Portuguese labour market. We use the Portuguese Labour Force Survey to classify training according to multiple criteria, including providing institution, purpose, duration, and content of the training activity. First, we establish some stylised facts about the extent and determinants of different types of training. We find that there are major differences in training participation across groups, with elder, low educated workers participating substantially less. Second, we measure the wage effects of training. We find that in Portugal returns to training are large and significant. The estimated coefficients are about 12% in the case of men and 37% in the case of women. We show that discriminating between gender, education level, experience, the public and the private sector, and industrial activity reveals important differences across categories of workers. Workers with low qualifications and long professional experience earn larger returns. On average, women receive larger returns than men, though they are subject to greater variation across education and experience groups. The average effect of training is similar in the private sector and in the public sector. Experience in the private sector and education in the public sector are key determinants of the returns to training. Further, training to improve current skills and training in a firm attract largest returns. Third, the paper investigates whether and to what extent training participation affects the probability of entering and leaving unemployment. We find that being trained does not affect significantly the transition probabilities.
    Keywords: returns to training, selection bias, logistic regression
    JEL: J7 J24 J31 I2
    Date: 2004–12
  9. By: Frank T. Denton; Byron G. Spencer
    Abstract: In just over three decades all those born during the post-war baby boom will be 65 and older, and the fraction of the population ‘old’ will be far greater than previously experienced in Canada, or indeed in any modern industrial nation. That prospect has given rise to major concerns about our ability as a society to meet the large anticipated additions to health care, pension, and other costs associated with the increase in the older population. However, a balanced view requires that attention be given to all publicly provided services, not only to those services used in large measure by the elderly, and also to privately provided goods and services, since the costs must be charged against the same national income in both cases. Beyond that, it is important to recognize that population change affects not only the demand side of the economy, but also the supply side, the nation’s productive capacity. This paper reviews the literature to assess the magnitude of the prospective cost increases associated with the aging of the Canadian population and considers the practical implications for government programs and policies.
    Date: 1999–02
  10. By: Michael Grossman
    Abstract: I discuss economic approaches to the demand for harmfully addictive substances and estimate time-series demand functions for the period from 1975 through 2003. My estimates suggest that changes in price can explain a good deal of the observed changes in cigarette smoking, binge alcohol drinking, and marijuana use by high school seniors. For example, the 70 percent increase in the real price of cigarettes since 1997 due to the Medicaid Master Settlement Agreement explains almost all of the 12 percentage point reduction in the cigarette smoking participation rate since that year. The 7 percent increase in the real price of beer between 1990 and 1992 due to the Federal excise tax hike on that beverage in 1991 accounts for almost 90 percent of the 4 percentage point decline in binge drinking in the period at issue. The wide swings in the real price of marijuana explain 70 percent of the reduction in particpation from 1975 to 1992, 60 percent of the subsequent growth to 1997, and almost 60 percent of the decline since that year. I conclude with implications for tax policy and for the lively and contentious debate concerning the legalization of marijuana, cocaine, and heroin.
    JEL: I12 I18
    Date: 2004–12
  11. By: Michael Grossman; Robert Kaestner; Sara Markowitz
    Abstract: The purpose of this paper is to examine the role of alcohol policies in reducing the incidence of sexually transmitted diseases among youth. Previous research has shown that risky sexual practices (e.g., unprotected sex and multiple partners) that increase the risk of contracting a STD are highly correlated with alcohol use. If alcohol is a cause of risky sexual behavior, then policies that reduce the consumption of alcohol may also reduce the incidence of STDs. In this paper, we examine the relationship between alcohol policies (e.g., beer taxes and statutes pertaining to alcohol sales and drunk driving) and rates of gonorrhea and AIDS among teenagers and young adults. Results indicate that higher beer taxes are associated with lower rates of gonorrhea for males and are suggestive of lower AIDS rates. Strict drunk driving policies in the form of zero tolerance laws may also lower the gonorrhea rate among males under the legal drinking age.
    JEL: I1
    Date: 2004–12
  12. By: Pilar García Gómez; Ángel López
    Abstract: In this paper we measure the degree of income related inequality in mental health as measured by the GHQ instrument and general health as measured by the EQOL-5D instrument for the Catalan population. We find that income is the main contributor to inequality, although the share of inequality in mental health that can be explained by income is much greater than the corresponding share of inequality in general health. We also find that the variation in demographic structure reduces income related inequality in mental health but increases income related inequality in general health. The regional variations in both instruments for health are striking, with the Barcelona districts faring relatively bad with respect to the rest of geographical areas and Lleida being the health region where, all else held equal, the population reports the greatest level of health. A big share of inequality in the two health measures, but specially mental health, is due to the favourable position in both health and income of those who enjoy an indefinite contract with respect to the rest of individuals. We also find that risky working conditions affect both health measures and are able to explain an important share of socio-economic inequality.
    Keywords: Health inequalities, decomposition analysis, Spain
    JEL: D63 I12 C21
    Date: 2004–03
  13. By: Joan Costa; Jaume Puig
    Abstract: Broadly speaking, pharmaceutical policy in Spain has been unable to control either the price or the volume of drugs prescribed. Limited attempts have been made to bring together the regulation of the pharmaceutical market and policies, in pursuit of the desired goals of efficiency and quality. This paper assesses the regulation of the Spanish pharmaceutical market over the last two decades by examining regulation and policy and the available empirical evidence on their appreciable effects, and presents recommendations for policy design. Our findings suggest that policies aiming to improve efficiency and quality have not managed to contain costs, while cost-effectiveness is still overlooked. We argue that future policies should encourage broader participation in the decision-making processes and promote a higher degree of competition, especially from generic drugs.
    Keywords: Spain, generic penetration, reference pricing, negative lists, pharmaceutical regulation
    JEL: I18 L51 L52 L65
    Date: 2004–06
  14. By: Roehlano M. Briones (WorldFish Center)
    Abstract: Unlike aversion to inequality, aversion to poverty resists formalization in welfare economics. One way to assign normative significance to the poverty line is to allow the welfare measure to exhibit a discrete loss from poverty (DLP) at z. However, the resulting redistribution scheme prioritizes headcount-reducing transfers to the borderline poor over transfers to the very poorest, rendering the DLP measure unattractive. The paper remedies this by transcending the conventional real valued welfare measure. It proposes a lexicographic L*-ordering, where the first rank criterion corresponds to an inequality-based evaluation function, while the second rank criterion corresponds to an evaluation function that exhibits DLP. The redistribution scheme entails transfers to the poorest until the first rank criterion is satisficed; only then may transfers be allocated to the borderline poor. The model’s parameters can represent varying degrees of concern for the poorest, highlighting its flexibility as a framework for welfare evaluation.
    Keywords: poverty, lexicographic ordering, inequality, redistribution, discontinuous choice
    JEL: I
    Date: 2004–12–08
  15. By: Joydeep Roy (Economic Policy Institute)
    Abstract: Local financing of public schools in the U.S. leads to a bundling of two distinct choices - residential choice and school choice - and increases the degree of socioeconomic segregation across school districts. A school finance reform can go a long way in weakening this link. In this paper I study the Michigan school finance reform of 1994 (Proposal A) which resulted in a comprehensive equalization of per pupil expenditures. Using panel data on Michigan K-12 districts and data from the decennial censuses I investigate whether the reform had any significant effects on spatial segregation. I find that Proposal A has been responsible for increases in housing stock and property values in the lowest spending school districts, and for improvements in several socioeconomic indicators, implying a decline is neighborhood sorting. However, there is continued high demand for residence in the highest spending communities, which points to the importance of neighborhood peer effects (‘local’ social capital).
    Keywords: School finance reform, spatial segregation, Tiebout sorting, peer effects.
    JEL: I2 R2
    Date: 2004–12–05
  16. By: Anandi Mani (Department of Economics, Vanderbilt University); Charles H. Mullin (Department of Economics, Vanderbilt University)
    Abstract: We examine the phenomenon of "pockets of teenage illegitimacy" in a model of social approval, where attitudes to such illegitimacy are endogenously determined at a local community level. Both a woman's actual well-being and her community's perception of that well-being in each potential state - staying in school and early childbearing - impact her decisions. In particular, since individuals can better appreciate the successes and failures of those making similar choices as themselves, the accuracy of a community's perception of a woman's well-being increases in the fraction of her community who chose her state. With positive correlation in potential well-being across the two states, these imprecise community perceptions can lead to multiple steady states: Pockets of high/low illegitimacy emerge even though individuals do not, per se, derive utility from conformity. These pockets could be triggered off by public policy measures (such as AFDC), but also by exogenous "shocks" such as the urban middle class flight from the inner city - as suggested by Wilson (1987). A novel prediction of the model is that the lower the variability in potential well-being in the childbearing state, the more easily a community can become trapped in the high-illegitimacy steady state. So, programs such as EITC, which increase the variability in well-being among single mothers, may be more effective in reducing teenage illegitimacy, than traditional approaches, such as AFDC, which reduce this variability. Finally, these high-illegitimacy pockets may be more responsive to non-pecuniary measures such as integrated housing projects and mentors, which increase the diversity of a teenager's circle of social interaction, than individual financial incentives.
    Keywords: Illegitimacy; Welfare; Education; Social Approval
    JEL: I3
    Date: 2001–02
  17. By: William J. Collins (Department of Economics, Vanderbilt University, NBER); Melissa A. Thomasson (NBER)
    Abstract: This paper examines the racial gap in infant mortality rates from 1920 to 1970. Using state-level panel data with information on income, urbanization, women's education, and physicians per capita, we can account for a large portion of the racial gap in infant mortality rates between 1920 and 1945, but a smaller portion thereafter. We then re-examine the post-war period in light of trends in birth weight, maternal characteristics, smoking, air pollution, breast-feeding, insurance, and hospital births.
    Keywords: infant mortality, health, race
    JEL: I12 J15 N32
    Date: 2002–02
  18. By: John J. Siegfried (Vanderbilt University and American Economic Association); Wendy A. Stock (Department of Agricultural Economics and Economics, Montana State University)
    Abstract: This paper reports results from a survey of the labor market experience of the 2001-02 class of Ph.D. economists. We estimate that 850 economics Ph.D.s were awarded by U.S. universities in 2001-02, down about 100 from five years earlier. Of these, 28 percent were women, and 37 percent U.S. citizens and permanent residents. On average, the graduates took 5.4 years to earn their Ph.D.s. Over 97 percent of the graduates secured a full-time job; 82 percent held permanent jobs; 59 percent were in academe. Ninety-four percent of respondents reported that they like their job. Those who do less research are more likely to be dissatisfied. The median salary of those holding full-time jobs in the U.S. is $74,000, up from $54,000 five years earlier, a compounded annual increase of 6.5 percent. Salaries of starting assistant professors are now significantly larger than the average of incumbent assistant professors at similar category institutions. Salary compression has progressed to salary inversion. A two-tier job market is emerging in academe, as the gap between the median annual nine-month salary of permanent (tenure-track) and temporary (visiting) academics has widened to $21,500. Nevertheless, 86 percent of the doctorates report that had they known at matriculation what they know now, they still would have pursued a Ph.D. in economics.
    Keywords: labor markets for Ph.D. economists, economists' salaries, time-to-degree for economics Ph.D.
    JEL: A11
    Date: 2004–01
  19. By: John P. Conley (Department of Economics, Vanderbilt University); Ping Wang (Vanderbilt University and NBER)
    Abstract: We consider a simple model in which agents are endowed with heterogeneous abilities and differing degrees of honesty. Agents choose either to become criminals or invest in education and become workers instead. The model is closed in that all criminal proceeds are stolen from agents working in the formal sector and that expenditures on both deterrence and punishment of criminals are paid for through taxes levied on workers. Thus, although we assume that there no direct interactive effects among criminals, criminals crowd each other in two ways: positively in that enforcement and punishment resources become more widely diffused as more agents commit crimes, and negatively in that the presence of more criminals implies that there is less loot to be divided over a larger number of thieves. We establish the possibility of multiple equilibria and characterize the equilibrium properties. We then evaluate the effectiveness of deterrence policies under a balanced government budget.
    Keywords: Criminal Behavior, Educational Choice, Punishment
    JEL: I2 J62 K42
    Date: 2004–01
  20. By: Malcolm Getz (Deparment of Economics, Vanderbilt Unversity); John J. Siegfried (Department of Economics, Vanderbilt University)
    Abstract: We test whether U.S. colleges and universities adjust their physical capital intensity to differences in factor prices by regressing the square feet of space per student on construction prices across institutions. The results indicate that physical space at selective liberal arts colleges and private comprehensive universities is unresponsive to relative factor prices. At public universities comprehensive universities the evidence suggests that students enjoy more space where building costs are lower. We are unable to explain a relationship for two-year colleges.
    Keywords: factor price effects on college input ratios
    JEL: I21 L23
    Date: 2004–02
  21. By: Eliana Cardoso (Department of Economics, University of Sao Paulo); Andre Portela Souza (Department of Economics, Vanderbilt University, and Department of Economics, University of Sao Paulo,)
    Abstract: The paper estimates the impact on school attendance and child labor of conditional cash payments to poor families in Brazil. It describes Brazil's transfer programs and presents statistics on school attendance and child labor. In the second half of the 1990s, many municipalities had adopted the "Bolsa Escola" (a cash transfer conditional on school attendance) and/or the federal minimum income program (in place during 1999 and 2000 and replaced by the "Bolsa Escola Federal" in 2001). Although conditional cash transfer programs in Brazil have been in place since 1996, studies on their ex-post impact are very few. Micro household level data from the 2000 Census allows the use of propensity score methods to estimate the impact of income transfers on child labor and school attendance. The paper finds that income transfer programs had no significant effect on child labor but a positive and significant impact on school attendance. These preliminary results suggest that these programs have not been effective in fighting child labor in Brazil. They increase the chance of a poor child going to school but do not reduce her labor activity perhaps because she prefers to combine school and labor, considering that the transfers are too small to provide an incentive to forgo the labor income.
    Keywords: Child labor, school attendance, income transfer programs, Brazil
    JEL: I28 I38 J22 J24
    Date: 2004–04
  22. By: Donald M. Pianto; Sergei Soares
    Abstract: The structure of some household surveys allows the evaluation of social programs which are implemented gradually by municipality and whose objectives are measurable by survey variables. Such evaluations do not require over sampling of areas in which the program was implemented, nor the application of additional questionnaires, while providing baseline data and non-experimental comparison groups. We use the PNAD survey to evaluate the impact of the Program for the Eradication of Child Labor on child labor, schooling, and income for municipalities which entered the program from 1997-1999. We present results both from a reflexive comparison and from matching municipalities to form a comparison group and measuring the difference in differences (D in D). Only the reduction of child labor is robust to the D in D analysis, while the reflexive results also demonstrate a significant increase in school attendance. We find the program to be more effective in smaller municipalities as suggested by Rocha (1999).
    JEL: I32 I38
    Date: 2004

This nep-edu issue is ©2004 by João Carlos Correia Leitão. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.