Education and earnings in urban West Africa

Using a series of comparable labor force surveys in urban West Africa, we estimate the private returns to education among representative samples of workers in seven economic capitals (Abidjan, Bamako, Cotonou, Dakar, Lome, Niamey and Ouagadougou). The data allow us to provide a unique cross-country comparison using rigorously the same variables and methodology for each country. We tackle the issues of endogenous sector allocation (public, formal private and informal sectors) and endogeneity of the education variable in the earnings functions. We find that the returns to schooling are most often enhanced once an endogenous education variable is accounted for. This effect holds particularly true in the informal sector. In most West African cities of our sample, the public sector gives more value to education, followed by the formal private sector and then the informal sector. We also shed light on convex returns to education in all the cities and sectors, including in informal activity. More generally, a major contribution of this paper is to provide evidence of significant effects of education on individual earnings in the informal sectors of the West African cities, even at high levels of schooling.     

Consequences of a tax on the brain drain for unemployment and income inequality in less developed countries

Welfare implications of an income tax paid by emigrant skilled workers are analyzed in a model which assumes international capital mobility and allows for unemployed labor in the modern sector of a developing country. The tax discourages overinvestment in education and also contributes to the welfare of those remaining through the direct revenue effect. However, expected earnings of unskilled workers decline as a result of the tax, while those of non-migrant skilled workers rise. The tax may thus exacerbate domestic income inequality. In addition, modern sector employment, output, and capital stock may fall.     

Female earnings and the divorce rate: a simultaneous equations model

Economists have contributed a great deal of research, both theoretical and empirical, to the study of marital formation and dissolution. Many empirical examinations of marriage and divorce rates exist based on Becker's seminal contributions to the literature. All of these divorce studies are single equation models, with female earnings assumed exogenous. As discussed by Becker (1981), however, causality may run in the opposite direction as well: the divorce rate may influence female earnings. This paper estimates a simultaneous equations model in which divorce rates and female earnings are the jointly endogenous variables. Data are by state, for 1960, 1970, 1980 and 1990. The state-wide divorce rate equation is an extension of Waters and Ressler (1999), and the specification of a state-wide earnings equation follows standard human capital theory. The specification of joint endogeneity between female earnings and the divorce rate allows valid inferences to be made regarding the effect of female earnings on divorce for the first time. Most previous single equation studies of divorce have found that increases in female earnings significantly increase divorce rates. A simultaneous equations model will allow inferences to be made regarding the possibility of joint determination, which may cause a reevaluation of previous results.     

Central Government versus private sector wages and cognitive skills: evidence using endogenous switching regression

The importance of estimation techniques that allow for nonrandom selection of workers into the public and private sectors has been established in the theoretical and empirical literature. A separate body of work has explored the contribution of cognitive and other basic skills to earnings. This article brings together these two strands of empirical literature using Adult Literacy and Lifeskills (ALL) survey data for Norway and Bermuda. In the case of Norway, results from both Ordinary Least Squares (OLS) and a switching regression model agree that cognitive skills are rewarded more in the public sector and that, in both sectors, the main effect is the direct effect of skills on earnings. In the case of Bermuda, however, switching regression estimates are substantially different with respect to the how skills affect earnings; furthermore, controlling for cognitive skills changes the nature of selection and, hence, the estimates of sector wage differentials.     

Is migration a good substitute for education subsidies?

Assuming a given educational policy, the recent brain drain literature reveals that skilled migration can boost the average level of schooling in developing countries. In this paper, we introduce educational subsidies determined by governments concerned by the number of skilled workers remaining in the country. Our theoretical analysis shows that developing countries can benefit from skilled emigration when educational subsidies entail high fiscal distortions. However when taxes are not too distortionary, it is desirable to impede emigration and subsidize education. We then investigate the empirical relationship between educational subsidies and migration prospects, obtaining a negative relationship for 105 countries. Based on this result, we revisit the country specific effects of skilled migration upon human capital. We show that the endogeneity of public subsidies reduces the number of winners and increases the magnitude of the losses.     

Earnings functions: beyond human capital

Taking a short-run view of the labour market, where individuals with given levels of education have to be matched with jobs differing in level of complexity and difficulty, wages are related to education and job levels. In a sample of some 13 000 observations, controlling for age, experience and sex, a model emphasizing both sides of the allocation process is favoured over the simple human capital view that ignores allocation once education is taken care of. It is claimed that the long-run human capital model can fruitfully be expanded with this short-run allocation structure. The empirical results measure the differences in earnings for individuals with given education working at different job levels, and shows them to be substantial. The relevance of adding job levels to the explanatory variables is illustrated with the case of female earnings discrimination and with differences in age–earnings profiles between general and vocational education.     

High skills pay off: the changing wage structure during economic transition in Poland

Economic transition turns the inherited wage structure upside down. Changes are rapid and dramatic. The Polish example shows that even in the first year of market-oriented reforms, there was a marked increase in earnings inequality, a dramatic rise in the wage premium for white-collar skills, and a significant jump in the returns to education. In contrast, skills acquired under the old system lost their value. It is younger workers who are rewarded with higher wages. The changes are spearheaded by the private sector, where inequalities and the educational premium are higher than in the public sector. Privatization, thus, has its social aspects in that it strengthens the incentive for human capital investment. This paper documents these changes and sets out possible explanations.     

Career, experience and returns to human capital: is the dual labour market hypothesis relevant for the UK?

This paper investigates the relationship between career status, labour market experience and returns to human capital accumulation in the context of a two-tier, career and non-career labour market. Using micro data from the British Household Panel Survey (BHPS), this study detects wage and employment mechanisms that differ between these two tiers of workers. The paper finds no support for the hypothesis of strict duality, by which the returns to education are expected to differ across labour market segments, with the returns in career employment being high and positive and the returns in the non-career sector being close to zero. The paper, however, finds support for significant returns to current tenure only in the career sector and also for the scarring hypothesis, according to which part-time employment and unemployment experience have a negative effect on participation and earnings in the career sector. Finally, there is evidence that only non-career earnings are significantly affected by local demand conditions, in contrast to earnings in the career sector. Career status is modelled as an endogenous variable subject to an initial job choice.     

Trade union membership and earnings in Kenyan manufacturing firms

This study analyses the effect of trade unions on male earnings in the Kenyan manufacturing sector using a regression method, which takes into account endogeneity of the union status of workers. In contrast to earlier studies of the Kenyan labour market that report a negative effect of unions on wages, a positive effect is found. The study further shows that elite workers tend to abstain from union membership.     

Investment and interruption: effects of the US experience on the earnings of return migrants in Mexico

Migration is widely viewed as an investment in human capital. However, due to the imperfect transferability of skills and knowledge across countries, migration trips are also career interruptions, especially for return migrants who may meanwhile experience depreciation of home country-specific skills. This article demonstrates that migration experience increases return migrants’ earnings in the home country on the condition that the migration stay is sufficiently long and mostly uninterrupted. Employing the revised human capital earnings function, the empirical study shows that only a barely interrupted US experience longer than five years, regardless of the legal status of the migration trips, predicts higher earnings of male return migrants in Mexico than comparable non-migrants. Robust findings emerge controlling for unobserved individual \]acteristics or using instrumental variables to deal with the self-selection and endogeneity. Short migration stays in the US and frequent traveling provide return migrants no wage premium in Mexico.     

Public sector motivation and development failures

This paper provides a theoretical analysis of the relationship between public sector motivation and development. In the model the public sector produces a public good and workers are heterogeneous in terms of public sector motivation (PSM). Wages in the private sector increase with the quality of the public good. In this context, public sector wage premia (PSWP) have two opposite effects: low PSWP helps screen workers with PSM into the public sector, while high PSWP helps motivate workers to be honest. Raising PSWP may not improve the quality of governance and multiple equilibria might arise. The model highlights that the relative importance of workers selection and provision of ”on the job” incentives in the public sector varies in systematic ways with wages in the private sector. We provide anecdotal and original empirical evidence consistent with the theoretical predictions and discuss some policy implications for public sector reforms in developing countries.     

Occupational Mobility and Wage Inequality

In this article we argue that wage inequality and occupational mobility are intimately related. We are motivated by our empirical findings that human capital is occupation specific and that the fraction of workers switching occupations in the U.S. was as high as 16% a year in the early 1970's and had increased to 21% by the mid-1990's. We develop a general equilibrium model with occupation-specific human capital and heterogeneous experience levels within occupations. We find that the model, calibrated to match the level of occupational mobility in the 1970's, accounts quite well for the level of (within-group) wage inequality in that period. Next, we find that the model, calibrated to match the increase in occupational mobility, accounts for over 90% of the increase in wage inequality between the 1970's and the 1990's. The theory is also quantitatively consistent with the level and increase in the short-term variability of earnings.     

Why the earnings of the middle class declined: evidence from Japan

Using rich governmental micro data, we explore the reasons for the decline in earnings of the middle class in Japan. Many developed countries have seen the decrease in middle-class earnings, and Japan, long known for its solid middle class, is no exception. Our analyses revealed that the main reasons for the decline differ between males and females. The decrease in the earnings of middle-class male workers is due to the decrease in general human capital captured by returns to potential experience years. In contrast, the decrease in the earnings of middle-class female workers is mainly due to the increase in the supply of part-time workers. Furthermore, the firm-specific human capital captured by the return to tenure has increased only among high-wage male workers. This implies that Japanese firms invest in a selected few able workers, regardless of age, because they have been changing human resource strategy in response to economic globalization and changes in technology and the management environment.     

A DYNAMIC ANALYSIS OF EDUCATIONAL ATTAINMENT,OCCUPATIONAL CHOICES,AND JOB SEARCH*

This article examines career choices using a dynamic structural model that nests a job search model within a human capital model of occupational and educational choices. Wage growth occurs in the model because workers move between firms and occupations as they search for suitable job matches and because workers endogenously accumulate firm and occupation specific human capital. Simulations performed using the estimated model reveal that both self‐selection in occupational choices and mobility between firms account for a much larger share of total earnings and utility than the combined effects of firm and occupation specific human capital.     

社会资本与技术创新的理论研究——基于企业视角的分析

社会资本对宏观经济发展和增长的影响是多层次、多角度的,它可以通过人力资本存量的提升、金融部门的发展以及企业技术革新等方面来刺激宏观经济又好又快的发展。然而,本文尝试从中微观角度出发,以相关的实证研究结果作为基础和前提条件,构建社会资本与企业技术创新的理论模型,并对其进行探讨和分析。但是,有关二者关系的实证性研究还有待于进一步的分析和探讨。     

The impact of job mobility on earnings growth of migrant workers in urban China

Using survey data on migrant workers in urban China, this paper carries out a positive study on the impact of inner-industrial and inter-industrial job shifts on earnings growth of migrant workers. Results show that low human capital, low employment grades and low income are the most important reasons for migrant workers to switch jobs. The migrant workers who are young, unmarried new entrants with low level of education, no training and low income tend to change their jobs within the industry. And those who have high income and who find their jobs by themselves are more likely to switch jobs inter-industrially. Inner-industrial job switches have a significant positive impact on earnings growth of low-income migrant workers and a significant negative one on that of high-income migrant workers. Moreover, inter-industrial shifts have a significant negative impact on earnings growth of migrant workers of all income levels. The inner cause for the positive effect of inner-industrial shifts lie in the fact that the cumulative effect of years of service within enterprises is not obvious while continuing engagement in the same type of job within an industry will lead to accumulation of qualifications, which has a significant augmentation effect on earnings of migrant workers.     

Human Capital, Study Effort, and Persistent Income Inequality

The paper shows that if an individual's cost of human capital accumulation depends on his parents' human capital and there exists a "raw labor" sector of production, individuals with low parental human capital may devote little effort in study and become unskilled workers. Further, if an individual exerts little effort in study, the human capital he accumulated may be even less than his parents'. Consequently, his children will have even lower parental human capital than him and they will therefore also become unskilled. Thus, the model shows that even when education is free, income inequality can persist across generations.     

Electricity demand estimation using proxy variables: some reservations

The purpose of this paper is to analyse the impact of asymmetric information upon labour market decisions. First, in the face of uncertainty concerning person-specific information, self-selection employment contracts develop which induce ‘sorting’ within the labour market. Second, we show the existence of a smaller share in investment in specific human capital for those who accept the self-selection contract relative to those who refuse such contracts. Thus, the earnings of those who accept such contracts are less responsive to changes in specific human capital than the earnings of those who refuse these contracts. Third, we applied the model to the market for professional teachers in British Columbia, Canada. The results of the empirical tests were shown to be consistent with the hypotheses proposed. In addition, once we controlled for the level of and the distribution to human capital the Public–Independent earnings differential fell from 64.3% to 23.9%.     

Wages, Experience and Seniority

In this paper we study the sources of wage growth. We identify the contribution to such growth of general, sector specific and firm specific human capital. Our results are interpretable within the context of a model where the returns to human capital may be heterogeneous and where firms may offer different combinations of entry level wages and firm specific human capital development. We allow for the possibility that wages are match specific and that workers move jobs as a result of identifying a better match. To estimate the average returns to experience, sector tenure and firm specific tenure within this context, we develop an identification strategy which relies on the use of firm closures. Our data source is a new and unique administrative data-set for Germany that includes complete work histories as well as individual characteristics. We find positive returns to experience and firm tenure for skilled workers. The returns to experience for unskilled workers are small and insignificant after 2 years of experience. Their returns to sector tenure are also zero. However, their returns to firm tenure are substantial.     

Earnings inequality and informal employment in Russia

In this paper, we explore the relationship between informality and earnings inequality using the data from the Russia Longitudinal Monitoring Survey (RLMS-HSE) for 2000–2010. We determine that during the entire period, earnings inequality was substantially higher in the informal sector. Informality increases earnings polarization, widening both tails of the earnings distribution. Nonetheless, inequality has declined in both formal and informal sectors. In the formal sector, changes in the distribution of monthly earnings between 2000 and 2010 were primarily generated by changes in the distribution of hourly earnings. In the informal sector, reduction of variation in monthly earnings went through two channels: declining differences in hourly rates and considerable compositional shifts within the informal sector. The results point to the importance of distributional analysis of earnings gaps and explicit accounting for the sector choice.