nep-edu New Economics Papers
on Education
Issue of 2010‒06‒04
ten papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Shifting trends in higher education funding By Pierre de Villiers; Liezl Nieuwoudt
  2. Strengthening financial education in California: expanding personal finance training among youth By Justina Cross
  3. Education Impact Study: The Global Recession and the Capacity of Colleges and Universities to Serve Vulnerable Populations in Asia By Gerard Postiglione
  4. Mothers’ Employment and their Children’s Schooling: a Joint Multilevel Analysis for India By F. Francavilla; Gianna Claudia Giannelli; Leonardo Grilli
  5. Education and the labour market : three essays on interrelations and multiple effects during lifetime. By Karasiotou, Pavlina
  6. Mentoring, Educational Services, and Economic Incentives Longer-term Evidence on Risky Behaviors from a Randomized Trial By Núria Rodriguez-Planas
  7. Optimal grading By Robertas Zubrickas
  8. Technological Transitions and Educational Policies By Mario Amendola; Francesco Vona
  9. Funding Higher Education and Wage Uncertainty: Income Contingent Loan versus Mortgage Loan By Giuseppe Migali
  10. Teaching entrepreneurship students to become knowledge-agents for innovation By Ronald Jean Degen

  1. By: Pierre de Villiers (Department of Economics, University of Stellenbosch); Liezl Nieuwoudt (Department of Economics, University of Stellenbosch)
    Abstract: The global increase in the demand for tertiary education, with higher education systems expanding in many countries from elite systems to universal access, necessitated changes to the nature of higher education financing. Tuition fees, or other charges (where it was previously free) were introduced, substantial increases in tuition fees (where fees previously did exist) took place and student aid systems moved away from grants towards student loans (to replace or supplement grants). The controversy and debate surrounding these issues were influenced by politics, legal issues, social policy issues and economic reasoning. The paper firstly considers the shift in higher education financing since the 1960s in light of the focus of economic thinking in the 1960s and 1970s (the human capital model, growth accounting, views on elite versus mass systems, the private/public nature of higher education and rates of return) compared to the more recent focus on primary education, private and social rates of return and cost sharing. The global typology of allocation mechanisms is then examined. Although a myriad of allocation systems is operational, a definite shifting trend from direct to indirect funding (to support students) of institutions can be identified. The paper subsequently explores the global workings, conditions and problems of income-contingent student loans (ICL) and then focuses on the South African trend in direct funding (including the current subsidy formula for higher education) and student support systems. The South African allocation system exhibits the global trend towards indirect funding and the South African ICL (NSFAS) is internationally highly commended.
    Keywords: Higher education, Public financing, Income contingent loan, Cost sharing
    JEL: H40 H52 I20
    Date: 2010
  2. By: Justina Cross
    Abstract: Cross explores multiple options for expanding personal finance training among youth in California, including statewide legislation or education code changes for financial education, professional development and training for teachers on personal finance concepts, and school district adoption of financial preparedness curriculum.
    Keywords: Financial literacy ; Education
    Date: 2010
  3. By: Gerard Postiglione
    Abstract: This paper reviews the capacity of colleges and universities to serve poor and vulnerable populations during past and present economic shocks. The main argument is that the environment of the global recession—an Asia far more economically integrated than during past economic shocks, with more unified aspirations to be globally competitive and socially responsible—need not delay reforms in higher education. In fact, the global recession is an opportune time for higher education in the Asia and Pacific region to continue reforming governance and administration, access and equity, internal and external efficiency, and regional collaboration. This paper proposes a series of measures to increase the resilience of higher education systems in serving poor and vulnerable populations during the economic recession.
    Keywords: capacity, colleges, universities, economic, vulnerable, populations, global, recession, administration, access, equity, internal, external, efficiency, regional, collaboration, measures, increase, resilience, higher, education, systems
    Date: 2010
  4. By: F. Francavilla (Policy Studies Institute at University of Westminster.); Gianna Claudia Giannelli (Università degli Studi di Firenze, Dipartimento di Scienze Economiche); Leonardo Grilli (Università degli Studi di Firenze, Dipartimento di Statistica.)
    Abstract: This paper studies the relation between mothers’ employment and their children’s schooling in India, where a high number of children are not attending school at compulsory school age. Using the second National Family Health Survey, the results of a joint multi-level random effects model show that, controlling for covariates, the correlation between mothers’ employment and children’s schooling is negative. A sensitivity analysis on wealth and education deciles shows that this relation disappears in urban areas and becomes weaker in rural areas only at the top wealth deciles, but persists for the more educated mothers. The last result may be driven by the low number of females with a high level of education in India, but it also seems to envisage that, for mothers with lower education, being literate does not increase pay conditions. These findings suggest that policies aiming at improving both women’s and children’s welfare should not only pursue higher levels of education, but also target improvements in women’s conditions in the labour market.
    Keywords: women’s employment, children’s schooling, household allocation of time, random effects, India, NFHS-2
    JEL: J13 J22 O15 O18
    Date: 2010
  5. By: Karasiotou, Pavlina
    Abstract: This thesis aims at exploring the ties between education and the labour market. It is a micro-analysis of the effects of education on individual labour market outcomes and vice versa, from adolescence till retirement, using both theoretical and empirical tools. The first chapter is a critical discussion of the relevant literature and an introduction to the rest of the chapters. We discuss the special features of the Belgian education system and labour market and explain why we chose Belgium as the country of interest. Finally, we give a brief outline of the methodological tools we are using. The second chapter discusses how family income and parental work status influence children’s secondary school track choices, which is a significant determinant of future school attendance and labour market outcomes. Our results suggest that income has no significant effect on track choices after we control for (observed and unobserved) family characteristics. This conclusion is in line with the relevant literature. On the other hand, parental work status affects track choices. An unemployed father significantly increases the probability that his child will choose a less promising school track. The third chapter decomposes the effect of schooling on earnings into three separate effects: on wages, unemployment and labour supply. We argue that the true effect of schooling on earnings is a composition of higher wages, less unemployment and increased labour supply. This contrasts the mincerian approach that schooling mainly results to increased wages. At the same time we show that different school tracks imply different gains from education; hence not only years in education but also the type of education course matters. Finally we find complementarities between general and vocational school qualifications. In the fourth chapter we develop a theoretical model of lifetime human capital and earnings with endogenous retirement. The model is then adjusted to different retirement schemes, and the initial findings change accordingly. The main conclusion is that, in most cases high skilled workers retire later. In our model, this is not a consequence of later labour market entrance, but is a result of higher lifetime earnings and higher opportunity cost of retirement for the high skilled. Different schemes change retirement incentives for the high skilled. At the extreme, a retirement scheme that fully compensates workers for past income could drive high skilled workers earlier outside the labour market. In principle however, retirement implies a higher income loss for the high skilled, therefore they choose a longer working career.
    Abstract: Le sujet de cette thèse consiste en l'étude des liens existants entre l'éducation et le marché du travail. Cette analyse microéconomique étudie les effets de l'éducation sur les performances individuelles sur le marché du travail, et vice versa, et ce à partir de l'adolescence jusqu'à l'âge de la retraite. Des outils aussi bien empiriques que théoriques ont été employés en vue de mener à bien nos objectifs. Le premier chapitre s'ouvre sur une présentation critique de la littérature se rapportant au sujet et offre une introduction aux autres chapitres. Nous y présentons les spécificités du système éducatif belge ainsi que de son marché du travail. Y sont également explicitées les raisons qui nous ont poussé à choisir la Belgique comme objet d'étude. Le premier chapitre se clôt sur une présentation des outils méthodologiques employés dans les chapitres ultérieurs. Le second chapitre examine l'influence des revenus familiaux et du statut professionnel des parents sur le choix d'orientation scolaire de l'étudiant en secondaires. L’orientation scolaire apparaisse comme étant un déterminant significatif de l'assiduité de l'étudiant aux cours ainsi que sur ses performances futures sur le marché du travail. Nos résultats montrent que le niveau de revenu n'a pas d'impact significatif sur les choix d'orientation de l'étudiant une fois que l'on contrôle pour les caractéristiques familiales (observées ou non). Nos conclusions sont en parfaite adéquation avec les résultats obtenus dans la littérature sur le sujet. Par contre, il s'avère que le choix d'orientation se voit influencé par le statut professionnel des parents. Un père sans emploi voit une augmentation significative de la probabilité que son enfant s'oriente plutôt vers des études moins ambitieuses. Le troisième chapitre présente une décomposition des effets de la scolarité sur les revenus du travail en trois éléments distincts : sur les salaires, le chômage et l'offre de travail. Nous soutenons que l'effet réel de la scolarité sur les revenus se marque principalement sur une hausse du niveau salarial, une diminution du chômage et une meilleure offre de travail. Nos conclusions s'écartent donc de l'approche de Mincer selon qui le principal effet de la scolarité se porte sur l'augmentation des salaires. En même temps nous montrons que différentes orientations scolaires entraînent différents gains à l'éducation. On voit dès lors que les types de cours choisis lors du parcours scolaire importent au même titre que la longueur (en années) du parcours. Nous montrons finalement les types de complémentarités existants entre l'éducation secondaire générale et professionnelle. Dans le quatrième chapitre nous développons un modèle théorique d'accumulation de capital humain et de revenus avec décision endogène de départ à la retraite. Le modèle est ensuite ajusté selon différents schémas de départ à la retraite qui modifieront respectivement nos résultats initiaux. Notre principale conclusion est que dans la plupart des cas, les employés plus qualifiés partent en retraite plus tardivement. Cette conclusion ne se justifie pas dans notre modèle par une entrée plus tardive de ceux-ci sur le marché du travail mais bien par le niveau salarial élevé et le coût d'opportunité plus élevé que représente le départ à la retraite des travailleurs à qualification élevée. Différentes formules de départ à la retraite entraînent différents incitants de départ pour les travailleurs qualifiés. A l'extrême, une formule de départ à la retraite compensant parfaitement le revenu passé du travailleur pourrait inciter les travailleurs qualifiés à quitter plus tôt le marché du travail. Toutefois, le départ à la retraite entraîne en principe une perte de revenu pour le travailleur qualifié qui choisit alors une plus longue carrière professionnelle.
    Keywords: Education; Labour market; Returns to education; Unemployment; Labour supply; Retirement;
    Date: 2010
  6. By: Núria Rodriguez-Planas
    Abstract: This paper is the first to use a randomized trial in the US to analyze the short- and long- term impacts of an afterschool program that offered disadvantaged high-school youth: mentoring, educational services, and financial rewards to attend program activities, complete high-school and enroll in post-secondary education on youths' engagement in risky behaviors, such as substance abuse, criminal activity, and teenage childbearing. Outcomes were measured at three different points in time, when youths were in their late-teens, and when they were in their early- and their late- twenties. Overall the program was unsuccessful at reducing risky behaviors. Heterogeneity matters in that perverse effects are concentrated among certain subgroups, such as males, older youths, and youths from sites where youths received higher amount of stipends. We claim that this evidence is consistent with different models of youths' behavioral response to economic incentives. In addition, beneficial effects found in those sites in which QOP youths represented a large fraction of the entering class of 9th graders provides hope for these type of programs when operated in small communities and supports the hypothesis of peer effects.
    Keywords: After-school program, short-, medium- and long-term effects, behavioral models, peer effects, criminal activity, teen childbearing and substance abuse.
    JEL: C93 I21 I22 I28 J24
    Date: 2010–05–27
  7. By: Robertas Zubrickas
    Abstract: Assuming that teachers are concerned with human capital formation and students - with ability signaling, in this paper we model a teacher-student relationship as an agency problem with conflicting interests. In our model, the teacher elicits effort from the student rewarding for it with a grade, the utility of which to the student is an ability signal inferred by the job market. In the event that the job market does not observe individual teachers' grading practice, teachers find grades as costless rewards and optimally choose to be lenient in grading. As a result, 'the problem of the commons'of good grades emerges leading to the depreciation of grading standards and grade inflation. The prediction of the model that the lower the expectations the teacher holds about her students' abilities, the flatter the grading rules she sets up is empirically supported.
    Keywords: Principal-agent model, teacher-student relationship, costless rewards, grading rules, mismatch of abilities and grades, grade inflation, teacher incentives
    JEL: C70 D82 D86 I20
    Date: 2010–05
  8. By: Mario Amendola; Francesco Vona (Sapienza University of Rome)
    Abstract: This paper presents an out-of-equilibrium model to explain cross-country dierences in the capacity to absorb new skill-biased technologies. The usual mainstream viewpoint stressing the role of labour markets will be re-examined in a context characterized by a sequential structure of both the process of production and the skill formation, whose interaction brings about coordination failures harming the viabiity of the innovation process. In this light, educational policies play a crucial role in restoring the required coordination. The robust results of the simulations show that educational policies appear to be important both in rigid and in exible systems. In the former case, educational policies nanced by taxation allow the system to escape a low productivity nal equilibrium. In the latter, they contrast the nancial constraint associated to a large decrease in the unskilled wage. Altogether, a moderate degree of rigidity seems the most appropriate institutional environment to reach the targets of viability and of a full exploitation of the technological potential.
    Keywords: Skill-Biased Technical Change, Labour Markets, Educational Policies, Out-of-Equilibrium Models
    JEL: E22 E24 O3
    Date: 2010
  9. By: Giuseppe Migali
    Abstract: Individual risk aversion and riskiness of investment in higher education are combined with two alternative loan-based financing systems, income contingent loans (ICL) and mortgage loans (ML), to investigate the effects on graduate lifetime expected utilities. We deal explicitly with the presence of hidden subsidies due to discounting, which is one of the main drawbacks of an ICL. The theoretical model has been calibrated using real data on graduate earnings and their volatility, together with the features of the English HE financing system, which has recently switched from a ML to an ICL system. Higher uncertainty in earnings in general makes an ICL the preferred system for risk averse individuals, while risk neutral individuals prefer mortgage loans.
    Keywords: Education Choice; Risk Aversion; Uncertainty
    Date: 2010
  10. By: Ronald Jean Degen (International School of Management Paris)
    Abstract: Drucker (1985) has postulated that entrepreneurship is the ?practice of innovation?. As such, he has outlined that it is knowledge-based, and that like any other practice (such as medicine or engineering) it can be learned. He wrote that we cannot develop a theory of innovation. But and that it is sufficient to say when, where, and how to look for innovation opportunities. As a consequence of the lack of a theoretical base for innovation, Drucker (and most other authors) simply ignore how entrepreneurs ?practice innovation? and how this practice can be learned; and have concentrated instead on how to systematically look for innovation opportunities. The constant demand by entrepreneurship students for information about how to learn the ?practice of innovation? forced me (Degen 1989, 2009) to develop some rudimentary approaches to learning the practice. This paper builds on these approaches, and tries to shed some additional light on the way entrepreneurs learn the ?practice of innovation? in such a way that they become ?knowledge agents for innovation?. This paper also explores how this practice can be taught to entrepreneurship students.
    Keywords: entrepreneurs as innovators, practice of innovation, knowledge-agents for innovation, creative process, teaching entrepreneurship
    JEL: M0 M1
    Date: 2010–05–26

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