nep-edu New Economics Papers
on Education
Issue of 2007‒09‒16
eight papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. The Role of Mathematical and Verbal Skills on the Returns to Graduate and Professional Education By Song, Moohoun; Orazem, Peter; Wohlgemuth, Darin
  2. Can increasing private school participation and monetary loss in a voucher program affect public school performance? Evidence from Milwaukee By Rajashri Chakrabarti
  3. Earnings functions when wages and prices vary by location By Dan Black; Natalia Kolesnikova; Lowell J. Taylor
  4. Subjective Beliefs and Schooling Decisions By Christian Belzil
  5. Parental choice and school markets: The impact of information approximating school effectiveness By Alejandra Mizala; Miguel Urquiola
  6. What's the Matter with Tie-breaking? Improving Efficiency in School Choice By Aytek Erdil; Haluk Ergin
  7. Why Parents Worry: Initiation into Cannabis use by Youth and their Educational Attainment By Ours, J.C. van; Williams, J.
  8. Older and Wiser? Birth Order and IQ of Young Men By Sandra E. Black; Paul J. Devereux; Kjell G. Salvanes

  1. By: Song, Moohoun; Orazem, Peter; Wohlgemuth, Darin
    Abstract: Students in majors with higher average quantitative GRE scores are less likely to attend graduate school while students in majors with higher average verbal GRE scores are more likely to attend graduate school. This sorting effect means that students whose cognitive skills are associated with lower earnings at the bachelor’s level are the most likely to attend graduate school. As a result, there is a substantial downward bias in estimated returns to graduate education. Correcting for the sorting effect raises estimated annualized returns to a Master’s or doctoral degree from about 5% to 7.3% and 12.8% respectively. Estimated returns to professional degrees rise from 13.9% to 16.6%. These findings correspond to a large increase in relative earnings received by postgraduate degree holders in the United States over the past 20 years.
    Keywords: Postgraduate, Rate of return, Demand for schooling, Quantitative skills, Qualitative skills, Sorting
    JEL: J3
    Date: 2007–09–07
  2. By: Rajashri Chakrabarti
    Abstract: The Milwaukee voucher program, as implemented in 1990, allowed only nonsectarian private schools to participate in the program. However, following a Wisconsin Supreme Court ruling, the program was expanded to include religious private schools in 1998. This second phase of the voucher program led to more than a three-fold increase in the number of private schools and almost a four-fold increase in the number of choice students. Moreover, because of some changes in funding provisions, the revenue loss per student from vouchers increased in the second phase of the program. This paper analyzes, both theoretically and empirically, the effects of these changes on public school performance (as measured by test scores) in Milwaukee. It argues that voucher design matters and that the choice of parameters in a voucher program is crucial in determining the effects of public school incentives and performance. In the context of a theoretical model of public school and household behavior, the paper establishes that the policy changes will lead to an improvement of the public schools in the second phase of the program as compared with the first phase. Following Hoxby (2003a, 2003b) in the classification of treatment and control groups and using 1987-2002 data and a difference-in-differences estimation strategy in trends, the paper then shows that the theoretical prediction is validated empirically. This result is robust to alternative samples and specifications and survives robustness checks, including correcting for mean reversion.
    Keywords: Educational vouchers ; Education - Economic aspects ; Private schools ; Public schools ; School choice ; Households
    Date: 2007
  3. By: Dan Black; Natalia Kolesnikova; Lowell J. Taylor
    Abstract: In this paper we study whether location-specific price variation likely affects statistical inference and theoretical interpretation in the empirical implementation of human capital earnings functions. We demonstrate, in a model of local labor markets, that the ?return to schooling" is a constant across locations if and only if preferences are homothetic ? a special case that seems unlikely to generally pertain. Examination of U.S. Census data (for 1980, 1990, and 2000) provides persuasive evidence that the return to a college education, relative to a high school education, does indeed vary widely across cities, e.g., in 1990 the return in Houston is 0.54 while in Seattle it is only 0.33. We provide theoretical reasons to suspect that the returns to education are relatively lower in expensive high-amenity locations, and present evidence consistent with this prediction. Finally, we raise concerns about standard empirical exercises in labor economics which treat the returns to education as a single parameter.
    Keywords: Wages ; Labor market ; Education
    Date: 2007
  4. By: Christian Belzil (GATE CNRS, Institute for the Study of Labor (IZA))
    Abstract: This paper considers the estimation of sequential schooling decisions made by agents who are endowed with subjective beliefs about their own ability. I use unique Italian panel data which provide information on i) the curvature of the per-period utility function, ii) schooling decisions, iii) post-schooling earnings, in order to estimate the future component of the differences in intertemporal utilities of school and work independently from the present component, (as in Geweke and Keane, 1995, 2001), and evaluate the importance of “present bias”. Under certain conditions, which include imposing equality between the modal belief and true ability, I recover individual specific subjective probability distributions. I estimate both the degree of confidence (a measure of spread) and the incidence of over (and under) estimation. I find that the future component of intertemporal utilities dominates schooling decisions. I find a strong incidence of under-estimation among the more able and a much smaller incidence of over-estimation among the low ability group. At the medium ability spectrum, there is evidence of some over-estimation. The degree of confidence is high and imply that agents have a substantial amount of inside information (36% of the population act on a degenerate subjective distribution). Overall, the variance of the objective ability heterogeneity distribution is 4 times as large the variance of the distribution characterizing subjective beliefs.
    Keywords: dynamic programming, education, over-confidence, present bias, rational expectation, subjective distributions
    JEL: J24
    Date: 2007–07
  5. By: Alejandra Mizala; Miguel Urquiola
    Abstract: The impact of competition on academic outcomes is likely to depend on whether parents are informed about schools’ effectiveness or valued added (which may or may not be correlated with absolute measures of their quality), and on whether this information influences their school choices. To explore these issues, this paper considers Chile’s SNED program, which seeks to identify effective schools, selecting them from within “homogeneous groups” of arguably comparable institutions. Its results are widely disseminated and the information it generates is quite different from that conveyed by a simple test-based ranking of schools (which in Chile, turns out to largely resemble a ranking based on socioeconomic status). We rely on a sharp regression discontinuity to estimate the effect that being identified as a SNED winner has on schools’ enrollment, tuition levels, and socioeconomic composition. Through five applications of the program, we find no consistent evidence that winning a SNED award affects these outcomes. This suggests that information on school effectiveness—at least as it is calculated and delivered by the SNED—might not much affect school markets.
    Date: 2007
  6. By: Aytek Erdil; Haluk Ergin
    Abstract: Very little is known about the student-optimal stable mechanism when school priorities are weak. In current practice, the student proposing deferred acceptance algorithm is applied after indifferences in priority orders are broken with a lottery. Although such a tie-breaking procedure preserves stability, it adversely affects the welfare of the students since it introduces artificial stability constraints. We propose a simple procedure to compute a student-optimal stable matching when priorities are weak. The idea behind our construction relies on a new notion which we call a stable improvement cycle. Abdulkadiroglu, Pathak, and Roth (2006) report that had our algorithm been applied to the preference data of the 2003-2004 New York City High School Match, 6,854 students (10.5% of the 63,795 matched students) would have been matched with schools higher on their preference lists without hurting the others. We run simulations to understand the qualitative effects of correlation in preferences and of locational preference on the size of the efficiency gain. We also investigate the strategic properties of the class of student-optimal stable mechanisms.
    Keywords: School Choice, Student-Optimal Stable Mechanism, Weak Priorities, Stable Improvement Cycles
    Date: 2007
  7. By: Ours, J.C. van; Williams, J. (Tilburg University, Center for Economic Research)
    Abstract: In this paper we use individual level data from the Australian National Drug Strategy Household Survey to study the relationship between initiation into cannabis use and educational attainment. Using instrumental variable estimation and bivariate duration analysis we find that those initiating into cannabis use early in life are much more likely to dropout of school compared to those who start later on. Moreover, we find that the reduction in years of schooling depends on the age at which initiation occurs, and that it is larger for females than males.
    Keywords: cannabis use; age of initiation; educational attainment
    JEL: C41 D12 I19
    Date: 2007
  8. By: Sandra E. Black (University of California, Los Angeles, NHH, NBER and IZA); Paul J. Devereux (University College Dublin, CEPR and IZA); Kjell G. Salvanes (Norwegian School of Economics, Statistics Norway, CEP and IZA)
    Abstract: While recent research finds strong evidence that birth order affects children’s outcomes such as education and earnings, the evidence on the effects of birth order on IQ is decidedly mixed. This paper uses a large dataset on the population of Norway that allows us to precisely measure birth order effects on IQ using both cross-sectional and within-family methods. Importantly, irrespective of method, we find a strong and significant effect of birth order on IQ, and our results suggest that earlier born children have higher IQs. Our preferred estimates suggest differences between first-borns and second-borns of about one fifth of a standard deviation or approximately 3 IQ points. Despite these large average effects, birth order only explains about 3% of the within-family variance of IQ. When we control for birth endowments, the estimated birth order effects increase. Thus, our analysis suggests that birth order effects are not biologically determined. Also, there is no evidence that birth order effects occur because later-born children are more affected by family breakdown.
    Keywords: birth order, IQ
    JEL: I2 J1
    Date: 2007–08

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