nep-edu New Economics Papers
on Education
Issue of 2010‒10‒16
eleven papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Quality and quantity of education in the process of development By Amparo Castelló-Climent; Ana Hidalgo-Cabrillana
  2. Tax Preferences for Higher Education and Adult College Enrollment By Sara LaLumia
  3. Education and the welfare gains from employment protection By Charlot Olivier; Malherbet Franck
  4. Redshirting, compulsory schooling laws, and educational attainment By Dionissi Aliprantis
  5. Pre-employment vocational education and training in Korea By Chae, ChangKyun; Chung, Jaeho
  6. Insuring student loans against the risk of college failure By Satyajit Chatterjee; Felicia Ionescu
  7. Differences between entrepreneurs and employees in their educational paths By Uschi Backes-Gellner; Simone Tuor; Daniela Wettstein
  8. Heterogeneity in the Returns to Education and Informal Activities By Arbex, Marcelo; Galvao, Antonio F.; Gomes, Fábio Augusto Reis
  9. Withering academia? By Bruno S. Frey
  10. Higher Education Firms Behavior Under Non-Profit Constraint By Daniel Toro Gonzalez
  11. The effect of preschool on the school performance of children from immigrant families. Results from an introduction of free preschool in two districts in Oslo By Nina Drange and Kjetil Telle

  1. By: Amparo Castelló-Climent; Ana Hidalgo-Cabrillana
    Abstract: We develop a theory of human capital investment to study through which channels students react to school quality when deciding about their investment in higher education (secondary and above) and how educational quality affects the growth process of an economy. In a dynamic general equilibrium closed economy. higher education requires an extra investment of private resources. whereas primary education is mandatory. The theory states that human capital accumulation raises with quality through two main effects: larger quality increases the number ofpeople with higher education (extensive channel). and it increases the volume of investment in higher schooling per individual (intensive channel). That is. even with perfect capital markets. relatively low quality could discourage opportunities to pursue education beyond primary school. since low quality decreases the returns from higher education. As a result, agents could get stuck at primary levels. The intensive channel establishes that once individuals decide to participate in higher schooling. the larger the quality of educational system. the larger the investment made by each agent. Educational quality may allow for different steps of development and that depending on quality the economy may follow different paths, Using cross-country data, empirical evidence shows that the proposed channels seem to be quantitatively important and that the effect of quality and quantity of education on growth depends on the stage of development.
    Keywords: Quality of education, Human capital composition, Economic growth
    JEL: I21 O11 O15 O4
    Date: 2010–09
  2. By: Sara LaLumia (Williams College)
    Abstract: The federal government delivers substantial college aid through the tax code, after introducing education tax credits in 1998 and a tuition deduction in 2002. The design of the Lifetime Learning tax credit and the tuition deduction may make them particularly useful to older students. This paper investigates how these provisions have affected college attendance of individuals in their 30s and 40s. For most adults, there is no effect on college attendance. Among men whose 1998 educational attainment falls short of earlylife educational expectations, eligibility for an education tax preference is associated with a 2.5 to 3.4 percentage point increase in the probability of college attendance.
    Keywords: college finance, education tax credits, and college enrollment
    JEL: H31 I22 I28
    Date: 2010–09
  3. By: Charlot Olivier; Malherbet Franck (Universite de Cergy-Pontoise, THEMA, F-95000 Cergy-Pontoise.; Universite de Cergy-Pontoise, THEMA, F-95000 Cergy-Pontoise, IZA and fRDB.)
    Abstract: In this paper, we generalize the study of the return to education undertaken in e.g. Laing, Palivos and Wang (1995) or Burdett and Smith (2002) to an environment where the link between education and employment stability is taken into account. This enables us to study how an European-like and Employment Protection Legislation (EPL) with heavily regulated long-term contracts and more flexible short-term contracts affects the return to schooling, equilibrium unemployment and welfare. In this context, we show that ¯ring costs and temporary employment have opposite effects on the rate of use of human capital and thus, on educational investments. We furthermore demonstrate that a laissez faire economy with no regulation is inefficient as it is characterized by insufficient educational investments leading to excess job destruction and inadequate job creation. By stabilizing employment relationships, firing costs may spur educational investments and therefore lead to welfare and productivity gains, though a first-best policy would be to subsidize education. However, there is little chance for a dual (European-like) EPL to raise the incentives to schooling and aggregate welfare.
    Keywords: human capital; job destruction; matching frictions; efficiency
    JEL: I20 J20 J60
    Date: 2010
  4. By: Dionissi Aliprantis
    Abstract: A wide literature uses date of birth as an instrument to study the causal effects of educational attainment. This paper shows how parents delaying their children’s initial enrollment in kindergarten, a practice known as redshirting, can make estimates obtained through this identification framework all but impossible to interpret. A latent index model is used to illustrate how the monotonicity assumption in this framework is violated if redshirting decisions are made in a setting of essential heterogeneity. Empirical evidence is presented from the ECLS-K data set that favors this scenario; redshirting is common and heterogeneity in the treatment effect of educational attainment is likely a factor in parents’ redshirting decisions.
    Keywords: Education
    Date: 2010
  5. By: Chae, ChangKyun; Chung, Jaeho
    Abstract: The Korean vocational education and training (VET) system is heralded as one of the key factors contributing to the countries past economic growth. VET has played an important role in developing a skilled labor force during Korea's economic development. However, with the increasing importance of higher education and general education, the status of VET in the country is declining. This paper explores recent Korean data to analyze the labor market outcomes of pre-employment VET institutions. The findings show that current vocational high school education is not associated with better labor market outcomes, in terms of employment rate, wage levels, prospect of permanent employment, and transition to the first job, when compared to general high school education. Among VET programs, the authors find that graduates of higher level, more comprehensive VET programs experience greater labor market achievements than graduates of less competitive, shorter programs. The authors also find that the VET institutes play an important role in supplying technical labor to small and medium enterprises (SMEs).
    Keywords: Tertiary Education,Secondary Education,Labor Markets,Education For All,Teaching and Learning
    Date: 2009–11–01
  6. By: Satyajit Chatterjee; Felicia Ionescu
    Abstract: Participants in student loan programs must repay loans in full regardless of whether they complete college. But many students who take out a loan do not earn a degree (the dropout rate among college students is between 33 to 50 percent). The authors examine whether insurance against college-failure risk can be offered, taking into account moral hazard and adverse selection. To do so, they develop a model that accounts for college enrollment, dropout, and completion rates among new high school graduates in the US and use that model to study the feasibility and optimality of offering insurance against college failure risk. The authors find that optimal insurance raises the enrollment rate by 3.5 percent, the fraction acquiring a degree by 3.8 percent and welfare by 2.7 percent. These effects are more pronounced for students with low scholastic ability (the ones with high failure probability).
    Keywords: Student loans ; Risk management ; Education, Higher - Economic aspects ; Insurance
    Date: 2010
  7. By: Uschi Backes-Gellner (Institute for Strategy and Business Economics, University of Zurich); Simone Tuor (Institute for Strategy and Business Economics, University of Zurich); Daniela Wettstein (Institute for Strategy and Business Economics, University of Zurich)
    Abstract: This paper examines whether individuals who become either entrepreneurs or employees follow sys-tematically different educational paths to a given educational level. Following Lazear’s jack-of-all-trades theory, we expect that entrepreneurs aim at a balanced set of different skills (academic or voca-tional), while employees specialize in one skill. This means that entrepreneurs follow educational paths that combine different types of education, while employees follow same-type paths while climb-ing up the educational ladder. We use the Swiss Labor Force Survey to test our hypothesis. Our em-pirical findings are in line with Lazear’s theory. Individuals who change between different types of education are more likely to become entrepreneurs. Thus, the permeability of a national educational system is one crucial determinant for entrepreneurship.
    Keywords: Entrepreneurship, Jack-of-all-trades, Educational paths
    JEL: I21 J24 M50
    Date: 2010–10
  8. By: Arbex, Marcelo; Galvao, Antonio F.; Gomes, Fábio Augusto Reis
    Date: 2010–10
  9. By: Bruno S. Frey
    Abstract: Strong forces lead to a withering of academia as it exists today. The major causal forces are the rankings mania, increased division of labor in research, intense publication pressure, academic fraud, dilution of the concept of “university,” and inadequate organizational forms for modern research. Academia, in a broader sense understood as “the locus of seeking truth and learning through methodological inquiry,” will subsist in different forms. The conclusion is therefore pessimistic with respect to the academic system as it presently exists but not to scholarly endeavour as such. However, the transformation predicted is expected to be fundamental.
    Keywords: Academia, universities, research, rankings, publications, fraud
    JEL: A1 I23 L30 Z0
    Date: 2010–10
  10. By: Daniel Toro Gonzalez
    Abstract: The present exercise is oriented to analyze the interaction and equilibrium in the higher education market and firms behavior under non-profit constraint for public and private institutions. The model suggest three different equilibrium in which differences in size and quality are explained based on institutions non-pecuniary valuations of each of these attributes.
    Date: 2010–09–29
  11. By: Nina Drange and Kjetil Telle (Statistics Norway)
    Abstract: Two districts of Oslo started to offer five-year-old children free preschool four hours a day. We analyze the effect of this intervention on the school performance of the children from immigrant families 10 years later (age 16). Our difference-in-difference approach takes advantage of the variation caused by the intervention being implemented in two districts in Oslo, leaving other similar districts unaffected. The grade point average of girls increases substantially more in the intervention districts than in the comparison districts; resulting in an effect estimate of more than a quarter of a standard deviation. There is no significant change in boys’ performance, and no support for disadvantageous effects on non-cognitive outcomes.
    Keywords: preschool; immigrants; early intervention; school performance
    JEL: J13 J15 H52 I28
    Date: 2010–09

This nep-edu issue is ©2010 by Joao Carlos Correia Leitao. 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.