Measuring Heterogeneity in the Returns to Education in Norway Using Educational Reforms

The decision to take more education is complex, and is influenced by individual ability, financial constraints, family background, preferences, etc. Such factors, normally unobserved by the researcher, introduce endogeneity and heterogeneity problems into estimating the returns to education. In this paper, these problems are addressed by estimating a comparative advantage model for schooling, in which the returns to education vary at different levels of education. The model requires that instruments must be specified at each level of education, and we suggest that different school reforms in Norway can serve as suitable instruments. In particular, we exploit the staged implementation of a major reform in the comprehensive school system in the 1960s. We find that the returns to education are strongly nonlinear. In particular, we find that the returns to upper secondary school and shorter programs at regional colleges, together with master’s programs at universities, have high returns as measured by wages. Also, we find that the average treatment effect is surprisingly high for medium-length educations (up to two years of college education). This means that increasing the general level of education, which was the intention of the comprehensive school reform of the 1960s and of other school reforms, has the potential to generate a high return in wages, although we do not consider the cost to society. We also find that there is a substantial difference between the average treatment effect and the effect of treatment on the treated for bachelor’s and master’s degrees at universities.Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models (Updated); Analysis of Education

Education and Family Background: Mechanisms and Policies

In every society for which we have data, people’s educational achievement is positively correlated with their parents’ education or with other indicators of their parents’ socioeconomic status. This topic is central in social science, and there is no doubt that research has intensified during recent decades, not least thanks to better data having become accessible to researchers. The purpose of this chapter is to summarize and evaluate recent empirical research on education and family background. Broadly speaking, we focus on two related but distinct motivations for this topic. The first is equality of opportunity. Here, major the research issues are: How important a determinant of educational attainment is family background, and is family background – in the broad sense that incorporates factors not chosen by the individual – a major, or only a minor, determinant of educational attainment? What are the mechanisms that make family background important? Have specific policy reforms been successful in reducing the impact of family background on educational achievement? The second common starting point for recent research has been the child development perspective. Here, the focus is on how human-capital accumulation is affected by early childhood resources. Studies with this focus address the questions: what types of parental resources or inputs are important for children's development, why are they important and when are they important? In addition, this literature focuses on exploring which types of economic policy, and what timing of the policy in relation to children's social and cognitive development, are conducive to children's performance and adult outcomes. The policy interest in this research is whether policies that change parents' resources and restrictions have causal effects on their children.intergenerational mobility, sibling correlations, education, education reform

Education and family background: Mechanisms and policies.

In every society for which we have data, people’s educational achievement is positively correlated with their parents’ education or with other indicators of their parents’socioeconomic status. This topic is central in social science, and there is no doubt that research has intensified during recent decades, not least thanks to better data having become accessible to researchers. The purpose of this chapter is to summarize and evaluate recent empirical research on education and family background. Broadly speaking, we focus on two related but distinct motivations for this topic. The first is equality of opportunity. Here, major the research issues are: How important a determinant of educational attainment is family background, and is family background—in the broad sense that incorporates factors not chosen by the individual—a major, or only a minor, determinant of educational attainment? What are the mechanisms that make family background important? Have specific policy reforms been successful in reducing the impact of family background on educational achievement? The second common starting point for recent research has been the child development perspective. Here, the focus is on how human-capital accumulation is affected by early childhood resources. Studies with this focus address the questions: what types of parental resources or inputs are important for children’s development, why are they important and when are they important? In addition, this literature focuses on exploring which types of economic policy, and what timing of the policy in relation to children’s social and cognitive development, are conducive to children’s performance and adult outcomes. The policy interest in this research is whether policies that change parents’ resources and restrictions have causal effects on their children.Intergenerational mobility; Sibling correlations; Education; Education reform.

Valuing School Quality via a School Choice Reform

Among policymakers, educators and economists there remains a strong, sometimes heated, debate on the extent to which good schools matter. This is seen, for instance, in the strong trend towards establishing accountability systems in education in many countries across the world. In this paper, in line with some recent studies, we value school quality using house prices. We, however, adopt a rather different approach to other work, using a policy experiment regarding pupils' choice to attend high schools to identify the relationship between house prices and school performance. We exploit a change in school choice policy that took place in Oslo county in 1997, where the school authorities opened up the possibility for every pupil to apply to any of the high schools in the county without having to live in the school's catchment area (the rule that applied before 1997). Our estimates show evidence that parents substantially value better performing schools since the sensitivity of housing valuations to school performance falls significantly by over 50% following the school choice reform.house prices, school performance, school reform

Pennies from Heaven? Using Exogeneous Tax Variation to Identify Effects of School Resources on Pupil Achievements

Despite important policy implications associated with the allocation of education resources, evidence on the effectiveness of school inputs remains inconclusive. In part, this is due to endogenous allocation; families sort themselves non-randomly into school districts and school districts allocate money based in order to compensate (or reinforce) differences in child abilities, which leaves estimates of school input effects likely to be biased. Using variation in education expenditures induced by the location of natural resources in Norway we examine the effect of school resources on pupil outcomes. We find that higher school expenditures, triggered by higher revenues from local taxes on hydropower plants, have a significantly positive effect on pupil performance at age 16. The positive IV estimates contrast with the standard cross-sectional estimates that reveal no effects of extra resources.pupil achievement, school resources

The evolution of inequality in productivity and wages: panel data evidence

There has been a remarkable increase in wage inequality in the US, UK and many other countries over the past three decades. A significant part of this appears to be within observable groups (such as age-gender-skill cells). A generally untested implication of many theories rationalizing the growth of within-group inequality is that firm-level productivity dispersion should also have increased. Since the relevant data do not exist in the US we utilize a UK longitudinal panel dataset covering the manufacturing and non-manufacturing sectors since the early 1980s. We find evidence that productivity inequality has increased. Existing studies have underestimated this increased dispersion because they use data from the manufacturing sector which has been in rapid decline. Most of the increase in individual wage inequality has occurred because of an increase in inequality between firms (and within industries). Increased productivity dispersion appears to be linked with new technologies as suggested by models such as Caselli (1999) and is not primarily due to an increase in transitory shocks, greater sorting or entry/exit dynamics

Multiple Unit Auctions and Short Squeezes

This paper develops a theory of multiple unit auctions with short squeezes in the post- auction market. This is especially relevant for financial and commodity markets where players may enter the auction with established forward positions. We study how a potential short squeeze impacts on bidders' strategies and auction performance. Conversely, we also study how the design of the auction affects the incidence of short squeezes. In particular, we model both uniform price and discriminatory price auctions in a true multiple unit setting, where bidders can submit multiple bids for multiple units. Our model is cast in what appears to be a common value framework. However, we show that the possibility of a short squeeze introduces different valuations of the to-be-auctioned asset between short and long bidders.Multiple unit auction, uniform auction, discriminatory auction, treasury auction, repo auction, short squeeze, market manipulation, market power

(1+1)-dimensional separation of variables

In this paper we explore general conditions which guarantee that the geodesic flow on a 2-dimensional manifold with indefinite signature is locally separable. This is equivalent to showing that a 2-dimensional natural Hamiltonian system on the hyperbolic plane possesses a second integral of motion which is a quadratic polynomial in the momenta associated with a 2nd-rank Killing tensor. We examine the possibility that the integral is preserved by the Hamiltonian flow on a given energy hypersurface only (weak integrability) and derive the additional requirement necessary to have conservation at arbitrary values of the Hamiltonian (strong integrability). Using null coordinates, we show that the leading-order coefficients of the invariant are arbitrary functions of one variable in the case of weak integrability. These functions are quadratic polynomials in the coordinates in the case of strong integrability. We show that for $(1+1)$-dimensional systems there are three possible types of conformal Killing tensors, and therefore, three distinct separability structures in contrast to the single standard Hamilton-Jacobi type separation in the positive definite case. One of the new separability structures is the complex/harmonic type which is characterized by complex separation variables. The other new type is the linear/null separation which occurs when the conformal Killing tensor has a null eigenvector.Comment: To appear on Journal of Mathematical Physic

Wages and Seniority When Coworkers Matter: Estimating a Joint Production Economy Using Norwegian Administrative Data

We develop an equilibrium model of wages and estimate it using administrative data from Norway. Coworkers interact through a task­-assignment model, and wages are determined through multi­lateral bargaining over the surplus that accrues to the workforce. Seniority affects wages through workplace output and relative bargaining power. These channels are separately identified by imposing equilibrium restrictions on data observing all workers within workplaces. We find joint production is important. Seniority affects bargaining power but is unproductive. We reinterpret gender and firm­-size effects in wages in light of the rejection of linearly separable production.wage distributions, productivity, matched data, multilateral bargaining, assignment models

The More the Merrier? The Effect of Family Composition on Children's Education

Among the perceived inputs in the production' of child quality is family size; there is an extensive theoretical literature that postulates a tradeoff between child quantity and quality within a family. However, there is little causal evidence that speaks to this theory. Our analysis is able to overcome many limitations of the previous literature by using a rich dataset that contains information on the entire population of Norway over an extended period of time and allows us to match adult children to their parents and siblings. In addition, we use exogenous variation in family size induced by the birth of twins to isolate causation. Like most previous studies, we find a negative correlation between family size and children's educational attainment. However, when we include indicators for birth order, the effect of family size becomes negligible. This finding is robust to the use of twin births as an instrument for family size. In addition, we find that birth order has a significant and large effect on children's education; children born later in the family obtain less education. These findings suggest the need to revisit economic models of fertility and child production', focusing not only on differences across families but differences within families as well.