Life-Cycle Bias and the Returns to Schooling in Current and Lifetime Earnings

This paper uses a unique data set with nearly career-long earnings histories to provide evidence on the returns to schooling in current and lifetime earnings. We use these results to assess the importance of life-cycle bias in earnings regressions using current earnings as a proxy for lifetime earnings. To account for the endogeneity of schooling, we apply three commonly used identification strategies. Our estimates demonstrate a strong life-cycle bias, often exceeding the bias from assuming that schooling is exogenous. We further explore the problems caused by life-cycle bias in research on the economic returns to schooling, and discuss possible remedies.returns to schooling, life-cycle bias, lifetime earnings, current earnings, errors-in-variables model

2SLS with Multiple Treatments

We study what two-stage least squares (2SLS) identifies in models with multiple treatments under treatment effect heterogeneity. Two conditions are shown to be necessary and sufficient for the 2SLS to identify positively weighted sums of agent-specific effects of each treatment: average conditional monotonicity and no cross effects. Our identification analysis allows for any number of treatments, any number of continuous or discrete instruments, and the inclusion of covariates. We provide characterizations of choice behavior implied by our identification conditions and discuss how the conditions can be tested empirically

Broadband Internet: An Information Superhighway to Sex Crime?

Does internet use trigger sex crime? We use unique Norwegian data on crime and internet adoption to shed light on this question. A public program with limited funding rolled out broadband access points in 2000-2008, and provides plausibly exogenous variation in internet use. Our instrumental variables and fixed effect estimates show that internet use is associated with a substantial increase in reported incidences of rape and other sex crimes. We present a theoretical framework that highlights three mechanisms for how internet use may affect reported sex crime, namely a reporting effect, a matching effect on potential offenders and victims, and a direct effect on crime propensity. Our results indicate that the direct effect is non-negligible and positive, plausibly as a result of increased consumption of pornography.rape, sex crimes, instrumental variables, broadband, internet, pornography

Arbeidstilbud blant innvandrere : Effektivitets- og fordelingsvirkninger av skattereformer

I løpet av perioden 1979–2006 har effekten av en lønnsøkning på arbeidstilbudet definert ved antall arbeidstimer endret seg fra å være positiv til å bli negativ; dvs. at mens en lønnsøkning tidligere ga et øket samlet arbeidstilbud, vil den nå føre til et fall i arbeidstilbudet. Den aggregerte lønnselastisiteten for ubetinget arbeidstid (som er gjennomsnittlig arbeidstid for alle, både de som er i jobb og de som ikke jobber) for den norske arbeidsstyrken falt fra falt fra 0,12 i 1994 til -0,08 i 2006; dvs. at i løpet av 13 år har substitusjonseffekten gått over fra å dominere til å bli dominert av inntektseffekten. Dette innebærer at mens en lønnsøkning tidligere ga et øket samlet arbeidstilbud, vil arbeidstilbudet nå falle. Videre fant vi at dette er tilfelle både for enslige kvinner og menn og for kvinner og menn som lever i parforhold

Time Aggregation and State Dependence in Welfare Receipt

Dynamic discrete-choice models are an important tool in studies of state dependence in benefit receipt. A common assumption of such models is that benefit receipt sequences follow a conditional Markov process. This property has implications for how estimated period-to-period benefit transition probabilities should relate when receipt processes are aggregated over time. This paper assesses whether the conditional Markov property holds in welfare benefit receipt dynamics in Norway using high-quality monthly data from administrative records. We find that the standard conditional Markov model is seriously misspecified. Estimated state dependence is affected substantially by the chosen time unit of analysis, with the average treatment effect of past benefit receipt increasing with the level of aggregation. The model can be improved considerably by permitting richer types of benefit dynamics: We find strong evidence for both duration and occurrence dependence in benefit receipt. Allowing for heterogeneity in the entry and persistence processes, we find important disparities in the effects of observed and persistent unobserved characteristics. Based on our preferred model, the month-to-month persistence probability in benefit receipt for a first-time entrant is 37 percentage points higher than the entry rate of an individual without previous benefit receipt. Over a 12-month period, this corresponds to an average treatment effect of 5 percentage points

Sequential Choices, Option Values, and the Returns to Education

Using detailed Norwegian data on earnings and education histories, we estimate a dynamic structural model of schooling and work decisions that captures our data's rich patterns over the life-cycle. We validate the model against variation in schooling choices induced by a compulsory schooling reform. Our approach allows us to estimate the ex-ante returns to different schooling tracks at different stages of the life-cycle and quantify the contribution of option values. We find substantial heterogeneity in returns and establish crucial roles for option values and re-enrollment in determining schooling choices and the impact of schooling policies

The Distributional Impact of Public Services When Needs Differ

Despite a broad consensus on the need to take into account the value of public services in distributional analysis, there is little reliable evidence on how the inclusion of such non-cash income actually affects poverty and inequality estimates. In particular, the equivalence scales applied to cash income are not necessarily appropriate when including non-cash income, because the receipt of public services is likely to be associated with particular needs. In this paper, we propose a theory-based framework designed to provide a coherent evaluation of the distributional impact of local public services. The valuation of public services, identification of target groups, allocation of expenditures to target groups, and adjustment for differences in needs are derived from a model of local government spending behaviour. Using Norwegian data from municipal accounts and administrative registers we find that the inclusion of non-cash income reduces income inequality by about 15 percent and poverty rates by almost one-third. However, adjusting for differences in needs for public services across population subgroups offsets about half the inequality reduction and some of the poverty decrease.income distribution, poverty, public services, non-cash income, needs adjustment, equivalence scales

Domestic Violence and the Mental Health and Well-being of Victims and Their Children

Almost one third of women worldwide report some form of physical or sexual violence by a partner in their lifetime, yet little is known about the mental health and well-being effects for either victims or their children. We study the costs associated with domestic violence (DV) in the context of Norway, where we can link offenders to victims and their children over time. Our difference-in-differences framework uses those who will be victimized in the future as controls. We find that a DV report involving the police is associated with large changes in the home environment, including marital dissolution and a corresponding decline in financial resources. A DV report increases mental health visits by 35% for victims and by 19% for their children in the year of the event, effects which taper off over time for the victim, but not for children. Victims also experience more doctor visits, lower employment, reduced earnings and a higher use of disability insurance while their children are more likely to receive child protective services and commit a crime. Using a complementary RD design, we find that a DV report results in declines both in children’s test scores and completion of the first year of high school

Life-cycle bias and the returns to schooling in current and lifetime earnings

The project is part of the research activities at the ESOP center at the Department of Economics, University of Oslo. ESOP is supported by the Research Council of Norway. An earlier version of this paper was circulated as NHH Discussion Paper 2011/4, dated February 29, 2011.Abstract: This paper uses a unique data set with nearly career-long earnings histories to provide evidence on the returns to schooling in current and lifetime earnings. We use these results to assess the importance of life-cycle bias in earnings regressions using current earnings as a proxy for lifetime earnings. To account for the endogeneity of schooling, we apply three commonly used identification strategies. Our estimates demonstrate a strong life-cycle bias, often exceeding the bias from assuming that schooling is exogenous. We further explore the problems caused by life-cycle bias in research on the economic returns to schooling, and discuss possible remedies.Financial support from the Research Council of Norway (194339) is gratefully acknowledged

Expanding Economic Opportunity for More Americans: Bipartisan Policies to Increase Work, Wages, and Skills

Many workers today find themselves lacking the skills and training necessary to thrive in the modern economy. Most low- and middle-income workers have not seen meaningful wage increases in many years. Millions of men and women are missing from the workforce altogether. These challenges stem from profound shifts in the American economy and necessitate a dedicated policy response.Over the course of the past year, the Aspen Economic Strategy Group collected policy ideas to address the barriers to broad-based economic opportunity and identified concrete proposals with bipartisan appeal. These proposals are presented here