Optimal Schooling Investments and Earnings: An Analysis Using Australian Twins Data

The potential impact that unobserved ability can have on both schooling and earnings outcomes has been modelled by Ashenfelter and Rouse (1998). This paper applies their model to the Australian Twins Sample. The best estimate of the return to schooling for genetically identical (or MZ) twins is 8.9 per cent. Measurement errors in the schooling data are shown to constitute a more serious problem than the omission of the family effects that impact on ability. Individuals from higher ability families receive a lower marginal benefit from their investment in human capital.     

Estimating the economic return to schooling on the basis of panel data

This paper is concerned with estimating the economic return to schooling of men in the Netherlands. An IV approach is adopted to estimate a panel data model with random individual effects. The fact that older individuals have relatively less schooling than younger individuals is exploited to construct instruments, and GNP per worker at the time an individual turned 16 is included to control for birth-cohort effects. The estimated return to schooling is about 15%. Ignoring the endogeneity of schooling results in a lower return to schooling. Ignoring birth-cohort effects results in a lower return to work experience.     

The Social Return to Apprenticeship Training

This paper draws together findings from a recent program of research to estimate the social rate of return to apprenticeship training and how the costs of training are distributed. It is estimated that 53 per cent of the costs of training an apprentice are borne by the employer, 28 per cent by the public sector and 19 per cent by the apprentice. This is in sharp contrast to the prediction of economic theory that trainees pay for general training. The social rate of return to male apprenticeships is estimated to be 12.8 per cent. This is in line with previous estimates of the social rate of return to university degrees and supports the case for policy measures to increase the level of apprenticeship training. Reforms taking place under the New Apprenticeships Systems are intended to shift the distribution of costs in line with that predicted by theory by placing a greater cost burden on apprentices for general training and increasing the specificity of training. If employers' willingness to offer apprenticeships has been a constraint, then these changes should stimulate apprenticeship training.     

Individual heterogeneity in the returns to schooling: instrumental variables quantile regression using twins data

Considerable effort has been exercised in estimating mean returns to education while carefully considering biases arising from unmeasured ability and measurement error. Recent work has investigated whether there are variations from the “mean” return to education across the population with mixed results. We use an instrumental variables estimator for quantile regression on a sample of twins to estimate an entire family of returns to education at different quantiles of the conditional distribution of wages while addressing simultaneity and measurement error biases. We test whether there is individual heterogeneity in returns to education and find that: more able individuals obtain more schooling perhaps due to lower marginal costs and/or higher marginal benefits of schooling and that higher ability individuals (those further to the right in the conditional distribution of wages) have higher returns to schooling consistent with a non-trivial interaction between schooling and unobserved abilities in the generation of earnings. The estimated returns are never lower than 9 percent and can be as high as 13 percent at the top of the conditional distribution of wages but they vary significantly only along the lower to middle quantiles. Our findings may have meaningful implications for the design of educational policies.     

COMPUTER SKILLS AND WAGES*

Data from the 1993 Survey of Training and Education show that 52 per cent of males and 60 per cent of females had at some time used a computer. An analysis using earnings functions reveals that computer usage is associated with a wage premium of between 12 and 16 per cent. Experiments show that omission of a variable recording computer usage from a wage equation will result in a bias of between 10 and 15 per cent in the estimated return to a year of schooling and similar distortion to the estimated return to experience.     

Rates of Return to Schooling in China

This study uses data from a 1988 survey of Chinese individuals to estimate rates of return to schooling in China. The Mincer-type rate of return to schooling was estimated at 4.02 percent in the rural areas and 3.29 percent in the urban areas; these are fairly low estimates compared with similar estimates in other countries. The rate of return to schooling for females was significantly higher than that for males in urban areas. In addition, members of the Communist Party in urban areas had significantly lower returns to schooling compared with non-members.     

Gender‐specific Human Capital,Openness and Growth: Exploring the Linkages for South Asia

Using data covering 1970–2008 for South Asia, this study investigates the influence of human capital disaggregated by gender, on economic growth. We use an extended version of the Solow growth model with per capita gross domestic product (GDP) a function of the key variables, viz. physical capital accumulation, human capital accumulation, trade openness and capital flows, fiscal policy and financial development. The key contribution of this study is to show that openness when interacted with the human capital stock disaggregated by gender, has differential impacts on economic growth. While the positive impact of male secondary schooling captures the direct skill effect relative to primary schooling, the marginal influence of female primary/secondary schooling fails to show a positive impact on growth at higher levels of openness. An implication stemming from this study is that educational opportunities for females at the secondary level should be increased for South Asia.     

Private and Social Rates of Return to Secondary and Higher Education in New Zealand: Evidence from the 1991 Census

Abstract
With significant increases in the demand for higher education in New Zealand since the 1980s, the question of the size of the returns to investments in education has been of significant interest. Despite this interest, studies have been few in number and based on aggregated measures from the 1960s to 1981. This study is the first to utilise micro-level data from the 1991 New Zealand Census. The study employs and compares the conventional methods of regression earnings functions, and internal rate of return analyses of private and social rates of return. The results indicate that returns to education are economically significant, at rates that are higher for females, even when adjusting for hours of work and female labour force participation differences. The returns are subject to diminishing returns, and social rates of return are 1 per cent to 3 per cent lower than private returns—a result that is consistent with those of OECD countries, but among the smaller differences by international standards .     

Proxying Ability by Family Background in Returns to Schooling Estimations is Generally a Bad Idea*

When schooling is measured with error and data on ability are lacking, return to schooling estimates will be subject to positive omitted variable bias (OVB) and negative measurement error bias (MEB). We investigate how these biases are affected when ability is proxied by family background variables. We show that the effect on OVB is uncertain, while MEB invariably increases in magnitude. Our empirical analysis demonstrates that MEB generally dominates OVB. With more background variables or increased measurement error, the total bias rapidly becomes negative and increasing in magnitude, thereby driving the return estimate further and further away from the true value.     

Human capital and economic development

This paper develops a general equilibrium model of fertility and human capital investment with young adult mortality. Because young adult mortality is negatively related to average young adult human capital, human capital accumulation lowers mortality, inducing demographic transition and industrial revolution. Data confirm that young adult mortality is related negatively to schooling, and the rate of return to schooling, and positively to fertility. The data indicate a negative relationship between TFP growth and schooling accumulation. The model fits the data on country populations, per capita incomes, human capital, total fertility rates, infant mortality, life expectancy and conditional life expectancy.     

School Choice and the Intergenerational Poverty Trap

This paper formulates a dynamic altruistic model of parental choice of school quality and intergenerational social mobility. It shows that when there are many school qualities, the earnings of children as a function of parental schooling investment is a non‐concave function, which leads to multiple steady‐state equilibria. The paper studies the intergenerational dynamics of parental schooling investment and gives conditions on the rate of return from parental schooling investment under which some families are stuck in an intergenerational poverty trap. The policy implications are also discussed.     

The effects of education on agricultural productivity under traditional and improved technology in northern Nigeria: an endogenous switching regression analysis

This paper estimates a more efficient version of an endogenous switching regression model to examine the effects of farmer education—schooling and extension contact—on cowpea production under traditional and improved technology in northern Nigeria. The results revealed significant productivity-enhancing effects of schooling and extension contact only under improved technology. Factors that promote technology adoption will thus indirectly raise the marginal contributions of farmer education; these include schooling, participatory technology evaluation, improved seed supply, and market access. The results demonstrate that schooling not only enhances agricultural productivity following technology adoption but also promotes adoption itself.     

Tax–preferred savings accounts and marginal tax rates: evidence on RRSP participation

The effect of taxes on participation in Registered Retirement Savings Plans between 1982 and 1996 is studied. Interprovincial changes in the tax structure over this period provide identifying variation. Using this variation, I find that taxes influence households' participation decisions, but more weakly than previously estimated. A 10 percentage point increase in the marginal tax rate is estimated to increase the probability of participation by 8 per cent. This explains only 5.1 per cent of the trend in participation. I also find suggestive evidence that the carryforward mechanism may be used as an instrument for tax base smoothing. JEL Classification: H24
Comptes d'épargne fiscalement privilégiés et taux marginaux d'imposition : résultats sur la participation aux régimes enregistrés d'épargne retraite (REER). Ce mémoire étudie les effets du régime d'imposition sur la participation aux régimes enregistrés d'épargne retraite (REER) entre 1982 et 1996. Les changements dans la structure d'imposition d'une province à l'autre au cours de la période fournissent un éventail de possibilités. Utilisant cet éventail, l'auteur découvre que le régime fiscal influence les décisions de participer des ménages, mais plus faiblement qu'on l'avait estimé précédemment. Un accroissement de 10 pour cent dans le taux marginal d'imposition accroît la probabilité de participation de 8 pour cent. Voilà qui explique seulement 5,1 pour cent de la tendance dans la participation. L'auteur découvre aussi que le mécanisme de report dans le temps de la portion inutilisée de la contribution aux REER peut être utilisé comme instrument de lissage de la base de revenus imposables.     

JOHN MAYNARD KEYNES MEETS MILTON FRIEDMAN AND EDMOND PHELPS: THE RANGE VERSUS THE NATURAL RATE IN AUSTRALIA, 1965:4 TO 2003:3

In this paper we compare the estimates of the range model in Lye and McDonald (2005a) with estimates of a natural rate model. We find that the range model is superior to the natural rate model according to econometric criteria and economic plausibility. Our estimates of the range model suggest that a significantly lower rate of unemployment is obtainable at the current time by aggregate demand policy, indeed a rate of 3.1 per cent for 2003:3 compared with about 6.5 per cent for the natural rate model. Thus we conclude that basing macroeconomic policy on the natural rate model would underrate the possibilities for economic welfare in Australia.     

Reconciling Kuznets and Habbakuk in a unified growth theory

Economic historians have debated the relative labor productivity of the United States agricultural and nonagricultural sectors during the nineteenth century. David (Discussion papers in economic and social history, University of Oxford, 1996) offers a reconciliation of the opposing views by suggesting that while productivity per hour worked in agriculture was comparable to productivity in other sectors, the number of hours worked per year was relatively low, creating a large gap in annual output per worker across sectors. We model and extend a version of Davis’s reconciliation within a unified growth theory that makes connections between the decline in traditional agriculture and several other features of United States development. The dynamic general equilibrium model is consistent with the structural transformation having minor direct and indirect effects on aggregate labor productivity per hour, but substantial effects on aggregate labor productivity per worker. The model also provides a close match to the trends in schooling, fertility, rates of return to physical capital, and labor productivity growth in the nineteenth century.      

Schooling, Informal Experience, and Formal Sector Earnings: A Study of Indian Workers

This paper estimates an earnings function for male workers belonging to the Indian corporate sector. The model allows for differential rates of return to schooling and distinguishes tenure from total labor market experience. The rate of return to schooling is found to be low up to the junior level, increases significantly at the secondary and undergraduate levels, but sharply declines at the masters level. Seniority and firm-specific factors are found to be important determinants of earnings. When years of unemployment and informal experience are incorporated, earnings of low-education workers appear to be driven entirely by formal-sector experience.     

Reporting errors, ability heterogeneity, and returns to schooling in China

Abstract. This study is aimed at providing a more accurate estimate of the returns to schooling in China by controlling for unobserved ability heterogeneity and measurement errors. We identify a unique instrument to correct for the omitted ability bias. We find that the attenuation bias caused by measurement error dominates the omitted ability bias in the OLS estimation. Based on the GMM estimation, for young workers in China, the return to schooling is 15.0% overall and 16.9% for women.     

Efficiency wages, employment, and the marginal income-tax rate: A note

In the framework of an efficiency-wage model, Hoel [Journal of Economics (1990) 51: 89–99] argues that a reduction in the marginal income-tax rate reduces employment. The present note shows that this result depends on how the tax reform is assumed to change the burden per worker. If the tax payment per worker is held constant, it cannot be ruled out that a lower marginal tax rate leads to an increase in employment.     

退休年龄、教育年限与社会保障

在本文中，我们用养老金的缴纳费率和养老金替代率代表社会保障制度，采用有限生命预期的连续时间状态代际交叠模型作为基本框架，分析了社会保障制度对消费者接受教育的年限、退休年龄、工作年限的选择、GDP增长率和利率的影响。同时，我们还分析了消费者的预期寿命对个体消费者接受教育的年限、退休年龄、工作年限的选择以及对社会保障制度的影响。     

退休年龄、教育年限与社会保障

在本文中,我们用养老金的缴纳费率和养老金替代率代表社会保障制度,采用有限生命预期的连续时间状态代际交叠模型作为基本框架,分析了社会保障制度对消费者接受教育的年限、退休年龄、工作年限的选择、GDP增长率和利率的影响。同时,我们还分析了消费者的预期寿命对个体消费者接受教育的年限、退休年龄、工作年限的选择以及对社会保障制度的影响。