Contents of Volume 1

CONTENTS OF VOLUME 1

Introduction to the Series

v

Contents of the Handbook

vii

Preface

xix

Chapter 1 Post Schooling Wage Growth: Investment, Search and Learning YONA RUBINSTEIN AND YORAM WEISS Abstract 1. Introduction 2. Wages and employment over the life cycle – A first glance 2.1. The pooled data 2.2. Cohorts and cross-sections 2.3. Panel data 2.4. Individual growth rates 2.5. The questions

3. Models of wage growth 3.1. Investment 3.2. Investment in school and on the job 3.3. 3.4. 3.5. 3.6. 3.7. 3.8.

Search Comparison of investment and search Putting the two together Human capital and skills Wages, productivity and contracts Unobserved productivity and learning

4. Basic findings and their interpretation 4.1. 4.2. 4.3. 4.4.

Mincer’s earnings function The variance covariance structure of earnings Labor mobility and wage growth Learning

5. Data appendix: Data and sample-inclusion criteria 5.1. The CPS individual-level repeated cross-section data set 5.2. The CPS monthly longitudinally matched data 5.3. The panel study of income dynamics

6. National Longitudinal Survey of Youth (NLSY) References xi

1 2 3 5 6 8 8 11 17 17 18 20 22 23 24 25 29 32 35 35 39 52 56 62 62 62 63 64 64

xii

Contents of Volume 1

Chapter 2 Long-Term Trends in Schooling: The Rise and Decline (?) of Public Education in the United States SANDRA E. BLACK AND KENNETH L. SOKOLOFF Abstract Keywords 1. Introduction 2. Early history 3. Public universities 4. The high school movement 5. Challenges and responses in the late 20th century 5.1. The growth of teachers’ unions 5.2. School finance reform: Success or failure? 5.3. Population heterogeneity and support for public schools

6. Conclusion References Chapter 3 Historical Perspectives on Racial Differences in Schooling in the United States WILLIAM J. COLLINS AND ROBERT A. MARGO Abstract Keywords 1. Introduction 2. Basic statistics

69 70 70 71 72 81 86 89 93 94 96 101 103

3. Race and the returns to schooling: Historical evidence 4. A model of educational attainment 5. Applying the model: An analytic narrative 6. Conclusions and suggestions for further research Acknowledgements Appendix References

107 108 108 109 110 111 121 124 129 134 136 137 140 142 148 149 150 150

Chapter 4 Immigrants and Their Schooling JAMES P. SMITH Abstract Keywords

155 156 156

2.1. Literacy 2.2. School attendance 2.3. 2.4. 2.5. 2.6.

Years of schooling Age-in-grade distributions The quality of schooling Desegregation

Contents of Volume 1

Introduction 1. Schooling of migrants and the native-born 2. The changing education gap of immigrants 3. The educational diversity of migrants – legal and unauthorized immigrants 4. Foreign students at American schools 5. Immigrant education and generational assimilation Conclusions Acknowledgement References Chapter 5 Educational Wage Premia and the Distribution of Earnings: An International Perspective FRANCO PERACCHI Abstract Keywords 1. Introduction and summary 2. Measurement and statistical issues

xiii

157 157 160 174 178 184 186 187 187

Acknowledgements References

189 190 190 191 192 193 195 197 198 201 202 202 204 209 212 216 217 218 224 230 235 236 240 249 249

Chapter 6 Educational Wage Premiums and the U.S. Income Distribution: A Survey DONALD R. DEERE AND JELENA VESOVIC Abstract Keywords

255 256 256

2.1. 2.2. 2.3. 2.4. 2.5.

Comparability of educational attainments Aggregate data on schooling Comparability of earnings data Statistical earnings functions Measurement errors in micro-level data on schooling

3. Educational attainments 3.1. 3.2. 3.3. 3.4. 3.5.

Educational composition of the population and the workforce A model of endogenous schooling Life expectancy and schooling decisions Supply and demand Expectations formations

4. Wage premia: Empirical evidence 4.1. Single-country studies 4.2. Multi-country studies 4.3. Studies based on harmonized cross-national data

5. Education and the distribution of personal earnings 5.1. Methodological aspects 5.2. Empirical evidence

xiv

Contents of Volume 1

1. Introduction 2. Educational wage premiums and the income distribution – early approaches 2.1. Occupation and wages 2.2. Education and income – early analyses 2.3. Improved measurement and analysis – education and wages after the 1940 census

3. The human capital revolution 3.1. The human capital earnings function 3.2. Issues, interpretation and extension

4. Increases in the return to human capital and the wage structure 4.1. Documenting facts about the changing wage structure 4.2. Causes of changes in the wage structure

5. Trends in education–wage premiums and the relationship to enrollment 5.1. Education and income 5.2. Education and wages 5.3. Wage dispersion within education groups 5.4. Education and earnings 5.5. Education and household income 5.6. Enrollment and education–wage premiums 5.7. Public school quality

6. Differences in enrollment, characteristics and earnings 6.1. Patterns of college enrollment 6.2. Differences in ability and family background 6.3. Differences in earnings 6.4. Summary

7. Concluding remarks Appendix Census data NLSY data

References Chapter 7 Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond JAMES J. HECKMAN, LANCE J. LOCHNER AND PETRA E. TODD Abstract Keywords 1. Introduction 2. The theoretical foundations of Mincer’s earnings regression 2.1. The compensating differences model 2.2. The accounting-identity model

3. Empirical evidence on the Mincer model 4. Estimating internal rates of return

257 257 258 259 260 262 263 264 265 266 267 269 269 273 275 278 283 287 289 290 290 293 295 297 298 298 298 300 301

307 310 310 311 315 315 316 320 327

Contents of Volume 1

xv

4.1. How alternative specifications of the Mincer equation and accounting for taxes and tuition

330 338 The internal rate of return and the sequential resolution of uncertainty 342 How do cross-sectional IRR estimates compare with cohort-based estimates? 358 Accounting for the endogeneity of schooling 364 7.1. Estimating the mean growth rate of earnings when ri is observed 367 7.2. Estimating the mean growth rate when ri is not observed 369 7.3. Adding selection bias 369 7.4. Summary 370 Accounting systematically for heterogeneity in returns to schooling: What does IV estimate? 370 8.1. The generalized Roy model of schooling 374 affect estimates of the internal rate of return (IRR)

4.2. Accounting for uncertainty in a static version of the model

5. 6. 7.

8.

8.2. Defining treatment effects in the generalized Roy model and relating them to true rates of return 8.3. Understanding why IV estimates exceed OLS estimates of the schooling coefficient 8.4. Estimating the MTE 8.5. Evidence from the instrumental variables literature 8.6. The validity of the conventional instruments 8.7. Summary of the modern literature on instrumental variables

9. Estimating distributions of returns to schooling Example 1. Access to a single test score Example 2. Two (or more) periods of panel data on earnings

10. Ex ante and ex post returns: Distinguishing heterogeneity from uncertainty 10.1. A generalized Roy model 10.2. Identifying information sets in the Card model 10.3. Identifying information sets 10.4. An approach based on factor structures 10.5. More general preferences and market settings 10.6. Evidence on uncertainty and heterogeneity of returns 10.7. Extensions and alternative specifications 10.8. Models with sequential updating of information

11. Summary and conclusions Appendix A: Derivation of the overtaking age Appendix B: Data description Census data Current Population Survey (CPS) data Tuition time series Tax rate time series

Appendix C: Local linear regression Tests of parallelism

References

381 386 390 392 403 406 407 413 415 417 418 420 422 424 428 429 441 441 442 446 448 448 449 449 449 450 451 451

xvi

Contents of Volume 1

Chapter 8 The Social Value of Education and Human Capital FABIAN LANGE AND ROBERT TOPEL Abstract Keywords 1. Introduction 2. Growth and production externalities of human capital 2.1. 2.2. 2.3. 2.4.

Human capital, education and economic growth Evidence from local data: States and cities Conclusion: What have we learned from micro-data? Human capital and growth revisited: American States, 1940–2000

3. Job market signaling and the social value of schooling 3.1. Diploma effects 3.2. Testing JMS using segmented labor markets 3.3. Employer learning models

4. Conclusions: What do we know about the social value of education? Appendix References Chapter 9 Why Has Black–White Skill Convergence Stopped? DEREK NEAL Abstract Keywords 1. Introduction 2. Trends in measures of the black–white skill gap

459 460 460 461 462 463 469 479 480 488 492 495 496 504 505 506

5. Conclusion Acknowledgements References

511 512 512 513 514 522 526 538 539 545 555 558 562 567 570 573 573

Chapter 10 Education and Nonmarket Outcomes MICHAEL GROSSMAN Abstract Keywords

577 578 578

2.1. Achievement gaps 2.2. Evidence from other test data

3. Skills and adult outcomes 3.1. Returns to cognitive skills 3.2. Education and labor market outcomes

4. Investments in children 4.1. Shocks to families and communities 4.2. Schools 4.3. The role of norms

Contents of Volume 1

1. Introduction 2. Conceptual foundations 2.1. Productive efficiency 2.2. Allocative efficiency 2.3. Schooling effects in the quantity–quality model of fertility 2.4. Biases, biases, biases 2.5. Schooling effects in models with endogenous tastes

3. Empirical evidence: Consumption patterns, total consumption, and consumption growth 3.1. Consumption patterns 3.2. Total consumption 3.3. Consumption growth

4. Empirical evidence: Health 4.1. Adult health 4.2. Child health

5. Empirical evidence: Other outcomes 6. Conclusions Acknowledgements References Chapter 11 Does Learning to Add up Add up? The Returns to Schooling in Aggregate Data LANT PRITCHETT Abstract Keywords 1. Introduction: Why mess with aggregate data? 2. Does schooling help explain puzzles in economic growth? 2.1. 2.2. 2.3. 2.4. 2.5.

The “Jones critique” is general Divergence in output per worker, convergence in schooling per worker Massive slowdown Volatility of growth Schooling and labor productivity growth

2.6. Summary on growth and education

3. Does macro-Mincer exceed micro-Mincer? 3.1. 3.2. 3.3. 3.4.

How big of an output externality should we be looking for? Measuring years of schooling and Mincer increments Are macro-Mincer and micro-Mincer consistent Reduced form regressions

3.5. Summary of cross-national estimates of returns to schooling

4. Directions forward on estimating cross-national returns to schooling 5. Conclusion Acknowledgements References

xvii

579 580 580 586 589 591 593 596 596 597 598 599 600 615 622 625 627 628

635 636 636 637 639 639 641 643 646 649 652 652 653 654 664 677 681 686 691 692 692

xviii

Contents of Volume 1

Chapter 12 Interpreting the Evidence on Life Cycle Skill Formation FLAVIO CUNHA, JAMES J. HECKMAN, LANCE LOCHNER AND DIMITRIY V. MASTEROV Abstract Keywords 1. Introduction 2. A summary of the empirical evidence on life cycle skill formation 2.1. Human capital accumulation 2.2. Early test score differentials 2.3. The evidence on the importance of noncognitive skills 2.4. Critical periods, sensitive periods, and socioemotional bases of skill formation and remediation 2.5. Interpreting the role of family income: The evidence on credit constraints 2.6. What is known about specific policies to foster ability and skill?

3. Using the technology of skill formation to explain the evidence 3.1. 3.2. 3.3. 3.4.

A model of skill formation The technology of skill formation in overlapping generations economies The technology of skill formation in a model with credit constraints The technology of skill formation in a model with market incompleteness

4. Summary and conclusions Acknowledgements Appendix A A.1. The general technology of skill formation A.2. Relationship with the Ben-Porath (1967) model

References

697 698 699 700 709 709 711 717 719 729 750 780 780 793 795 796 799 802 802 802 804 805

Author Index

I-1

Subject Index

I-13