Where do I go and what should I do? Routes through further education

This paper investigates the educational attainment of young people between the ages of sixteen and eighteen after having entered full-time post-compulsory education. In particular we focus on the educational attainment and labour market trajectory of `underachievers´: young people who have chosen to remain in full-time education at age sixteen, despite not gaining the widely recognised U.K. academic benchmark of five GCSE grades A*-C. Our results suggest that the best route to educational success for young people considered as of lower ability at age 16 is through the FE college where they catch-up with their `more able´ counterparts by age 18

The Cost Structure of Higher Education in Further Education Colleges in England

This paper examines the cost of the increased provision of higher education courses within further education colleges in England. We believe this to be the first attempt to fit a cost function specifically to the further education sector. Cost functions for a sample of 96 colleges over a two-year period, from 2000 to 2002, are fitted using a panel data methodology as well as stochastic frontier analysis. We compare and contrast our findings with a sample of 959 US colleges. Our findings indicate that most further education colleges are able to benefit from economies of scale. Results from both methodologies suggest the presence of product-specific economies of scale, substantial ray economies of scale and indicate that higher education classroom-based courses, such as business studies, as well as vocational courses display substantial economies of scope

Debt and Health

Debt problems in the UK have recently become much more severe, especially for the lowest income groups, and we examine here their impact on health, using data from the national Families´ and Children´s Survey (FACS). We model the relationship between debt and health as a simultaneous two-way interaction, and find that debt levels have a negative effect on both physical and psychological health. We find that debt repayment structure, defined as the percentage of debt borrowed in high-interest categories, has an impact on health independent of the level of debt. The interaction between debt and health may aggravate the poverty trap, by pushing heavily-indebted low-income people into ill-health, which then makes it difficult for them to acquire or hold on to the steady jobs needed to ease their debt problems. We also find that worry has a negative influence on debt management capacity, and thence on health, which makes it more difficult for those caught in a debt trap to escape from it. Membership of credit unions tends to reduce worry, however, and thereby may facilitate escape from the debt-ill health spiral

Community development finance institutions and the ‘poverty trap’: social and fiscal impact

This paper examines the current and potential ability of `community development financial institutions´ – institutions aimed at reducing the incidence of financial exclusion at the bottom end of the capital market – to reduce poverty, and the fiscal implications of this process. It seeks to connect the growing literature on labour supply functions for the self-employed with the literature on poverty and measures to escape from it, generating in the process a `poverty exit function´ which is then estimated against data (at this stage, a pilot sample of 45 self-employed households only, plus their employees) for three UK cities. Our model, by analogy with the `poverty trap´ models sometimes used in developing countries, has potentially self-reinforcing features, in which in the presence of certain parameter values efforts to get out of poverty only make the problem worse; but this, to our knowledge, is the first application of such a model to an industrialised country. The quantitative analysis indicates a negative role, in escaping from the poverty trap, for uninsured shocks. It indicates a positive role for formal education and for institutional measures which protect against risk; indeed, some of independent variables such as training are significant only if interacted with protection against risk, implying that simple injections of inputs are insufficient as a support policy for the sector. We make a preliminary investigation of the fiscal savings arising from investment in the CDFI sector, of which the upper bound is about £350 million a year or about 1.5 per cent of the total social social security budget; these impacts, however, are sensitive to variations in the policies of both CDFIs and the various levels of government support for the sector. The qualitative part of the analysis, in addition, suggests a positive role for `integrated support´ to microentrepreneurs which combines finance, mentoring and training. We have observed that many escapes from the poverty trap are achieved by employees rather than by entrepreneurs, which draws attention to the importance of growing along a labour-intensive production function, which ironically was in our sample secured better by small-to-medium firms than by start-up enterprises. Finally, a key variable in the exit-from-poverty process is the `regeneration multiplier´: the extent to which benefits provided by CDFIs remain within, or leak outside, target areas of high social deprivation. This multiplier varied greatly across our samples, being highest in Glasgow and lowest in Sheffield. We surmise (and proper analysis of this parameter is an important agenda for future research) that the regeneration multiplier varies negatively with the wage level and positively with the level of human capital inside regeneration areas. Diversification of financial products, and accompanying expenditure in support of regeneration areas by incentives to source labour and materials locally, could be a useful addition to this policy agenda

Incentivising Trust

We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity in response to an initial offer of money within a two-person game. An incentive is conveyed both by means of variations in the multiplier applied to the first player´s initial offer and by giving the first player the opportunity to insure themselves against the possibility that the second player will fail to reciprocate their initial offer. Measured trust is strongly responsive to both these incentives. Thus third parties have the ability to influence the outcome of the game, not only, as in the analysis of Charness et al (2008), by punishing failure to reciprocate and rewarding `good´ initial offers, but also by offering protection which strengthens the first player´s risk efficacy, or ratio of assets to risk

Community development finance institutions and the ‘poverty trap’: social and fiscal impact

This paper examines the current and potential ability of `community development financial institutions´ – institutions aimed at reducing the incidence of financial exclusion at the bottom end of the capital market – to reduce poverty, and the fiscal implications of this process. It seeks to connect the growing literature on labour supply functions for the self-employed with the literature on poverty and measures to escape from it, generating in the process a `poverty exit function´ which is then estimated against data (at this stage, a pilot sample of 45 self-employed households only, plus their employees) for three UK cities. Our model, by analogy with the `poverty trap´ models sometimes used in developing countries, has potentially self-reinforcing features, in which in the presence of certain parameter values efforts to get out of poverty only make the problem worse; but this, to our knowledge, is the first application of such a model to an industrialised country. The quantitative analysis indicates a negative role, in escaping from the poverty trap, for uninsured shocks. It indicates a positive role for formal education and for institutional measures which protect against risk; indeed, some of independent variables such as training are significant only if interacted with protection against risk, implying that simple injections of inputs are insufficient as a support policy for the sector. We make a preliminary investigation of the fiscal savings arising from investment in the CDFI sector, of which the upper bound is about £350 million a year or about 1.5 per cent of the total social social security budget; these impacts, however, are sensitive to variations in the policies of both CDFIs and the various levels of government support for the sector. The qualitative part of the analysis, in addition, suggests a positive role for `integrated support´ to microentrepreneurs which combines finance, mentoring and training. We have observed that many escapes from the poverty trap are achieved by employees rather than by entrepreneurs, which draws attention to the importance of growing along a labour-intensive production function, which ironically was in our sample secured better by small-to-medium firms than by start-up enterprises. Finally, a key variable in the exit-from-poverty process is the `regeneration multiplier´: the extent to which benefits provided by CDFIs remain within, or leak outside, target areas of high social deprivation. This multiplier varied greatly across our samples, being highest in Glasgow and lowest in Sheffield. We surmise (and proper analysis of this parameter is an important agenda for future research) that the regeneration multiplier varies negatively with the wage level and positively with the level of human capital inside regeneration areas. Diversification of financial products, and accompanying expenditure in support of regeneration areas by incentives to source labour and materials locally, could be a useful addition to this policy agenda

A longitudinal analysis of the decision to drop out of post-compulsory education

In this paper we analyse the magnitude, timing, determinants and outcomes of dropping out of post-compulsory education over the period 1985-94. We use data from the Youth Cohort Surveys for England and Wales to estimate non-parametric single and competing risks duration models allowing for the effects of unobserved heterogeneity and time varying covariates. By the mid-1990s approximately 1 in 10 young people dropped out of post-compulsory education, especially in April and July. Dropouts were more likely to get jobs rather than become unemployed and the most important predictor of the likelihood of dropping out was prior attainment.

Being your own boss: the many faces of self-employment

The number of individuals registered as self-employed in the UK has grown considerably over the past decade. The economics literature generally agrees that the self-employed work longer hours than their counterparts who are in paid employment and earn less. However, most of the literature considers the self-employed as a homogeneous group of individuals, whereas in reality, the term now encompasses a variety of very different entrepreneurs, such as businesses or partnerships, sole traders, freelance workers and sub-contractors. Using UK panel data, this paper examines the differences in the characteristics of self-employed individuals by self-employment type to highlight the difference between these groups and their employed counterparts. Random effect probit estimations that model the determinants of being in different self-employment groups highlight the heterogeneous nature of self-employment and their different determinants. Wage estimations reveal different returns to separate classifications of self-employment

The Educational Success of China’s Young Generation of Rural-to-Urban Migrants

The education policies introduced in the rural areas of China following the end of the ‘cultural revolution’ resulted in an improved provision of educational institutions along with better quality teachers which increased the educational attainment of young rural migrants and raised their career aspirations. This paper uses data from the Rural-Urban Migration in China (RUMiC) dataset for 2009, in a novel examination of the wage returns to schooling for young and old generations of rural-migrant and urban workers in order to ascertain whether the improved schooling has led to better outcomes. Another novel feature is the examination of the wage returns to over-, required and under-education. We find evidence that the wage return to schooling for young rural-to-urban migrants is larger than that for older migrant workers and that the return to schooling for young urban residents is lower than that of older workers. There is evidence of young migrants receiving a wage premium where they are overeducated for their job