nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2010‒11‒06
four papers chosen by
Maximo Rossi
University of the Republic

  1. Estimating Marginal Returns to Education By Carneiro, Pedro; Heckman, James J.; Vytlacil, Edward
  2. Crime and Education in a Model of Information Transmission By Darwin Cortés; Guido Friebel; Darío Maldonado
  3. The unemployment challenge in Europe.. By Nickell, Steven J
  4. Produce or speculate? Asset bubbles, occupational choice and efficiency By Cahuc, P.; Challe, E.

  1. By: Carneiro, Pedro (University College London); Heckman, James J. (University of Chicago); Vytlacil, Edward (Yale University)
    Abstract: This paper estimates the marginal returns to college for individuals induced to enroll in college by different marginal policy changes. The recent instrumental variables literature seeks to estimate this parameter, but in general it does so only under strong assumptions that are tested and found wanting. We show how to utilize economic theory and local instrumental variables estimators to estimate the effect of marginal policy changes. Our empirical analysis shows that returns are higher for individuals more likely to attend college. We contrast the returns to well-defined marginal policy changes with IV estimates of the return to schooling. Some marginal policy changes inducing students into college produce very low returns.
    Keywords: returns to schooling, marginal return, average return, marginal treatment effect
    JEL: J31
    Date: 2010–10
  2. By: Darwin Cortés (Universidad del Rosario); Guido Friebel (Goethe-Universität); Darío Maldonado (Universidad del Rosario)
    Abstract: We model the decisions of young individuals to stay in school or drop-out and engage in criminal activities. We build on the literature on human capital and crime engagement and use the framework of Banerjee (1993) that assumes that the information needed to engage in crime arrives in the form of a rumor and that individuals update their beliefs about the profitability of crime relative to education. These assumptions allow us to study the effect of social interactions on crime. We first show that a society with fully rational students is less vulnerable to crime than an otherwise identical society with boundedly rational students. We also investigate the spillovers from the actions of talented students to less talented students and show that policies that decrease the cost of education for talented students may increase the vulnerability of less talented students to crime. This is always the case when the heterogeneity of students with respect to talent is sufficiently small.
    Keywords: Human Capital, The Economics of Rumors, Social Interactions, Urban Economics
    JEL: D82 D83 I28
    Date: 2010–10
  3. By: Nickell, Steven J
    Date: 2010
  4. By: Cahuc, P.; Challe, E.
    Abstract: We study the macroeconomic effects of rational asset bubbles in an overlapping-generations economy where asset trading requires specialized intermediaries and where agents freely choose between working in the production or in the financial sector. Frictions in the market for deposits create rents in the financial sector that affect workers' choice of occupation. When rents are large, the private gains associated with trading asset bubbles may lead too many workers to become speculators, thereby causing rational bubbles to lose their efficiency properties. Moreover, if speculation can be carried out by skilled labor only, then asset bubbles displace skilled workers away from the productive sector and raise income and consumption inequalities. Classification-JEL: E22; E44; G21.
    Keywords: Rational bubbles; occupational choice; dynamic efficiency.
    Date: 2010

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