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Grawe, Nathan D. and Casey B. Mulligan (2002).
Economic Interpretations of Intergenerational Correlations.
In: Journal of Economic Perspectives
16(3)
, 45-58
.
Abstract.
Link.
Economic theory offers interpretations of intergenerational correlations that are different from the theories of other disciplines, and have important policy implications. Our paper presents a subset of those theories, and shows how they are consistent with observed mobility patterns as they vary across countries, demographic groups, and economic status measure. The data may suggest that the economic approach overemphasizes credit constraints, although more work is needed to further develop some of the alternative economic models. We also show how, in the models, 'progressive' policy may reduce mobility depending on how the policy is administered and how mobility is measured. [close]
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Solon, Gary (2002).
Cross-Country Differences in Intergenerational Earnings Mobility.
In: Journal of Economic Perspectives
16(3)
, 59-66
.
Abstract.
Link.
An accumulation of empirical evidence indicates substantial cross country variation in intergenerational earnings mobility. The United States and the United Kingdom, for example, appear to be less mobile societies than Canada, Sweden, and Finland. A theoretical model suggests that cross-country differences in intergenerational mobility could be associated with differences in the earnings returns to human capital investment, the progressivity of public investment in children's human capital, and the heritability of earnings-related traits. [close]
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Solon, Gary (1999).
Intergenerational Mobility in the Labor Market.
In: Orley Ashenfelter and David Card (eds.).
Handbook of Labor Economics.
Amsterdam:
Elsevier
, 1761–1800
.
Abstract.
Link.
This chapter summarizes what has been learned from recent research on intergenerational transmission of earnings status. The chapter begins by using a simple theoretical model to highlight several key concepts. Then it reviews (and discusses the connections among) three related empirical literatures: on sibling correlations in earnings, on the intergenerational elasticity of offspring's earnings with respect to parents' earnings or income, and on neighborhood effects. [close]
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Bowles, Samuel and Herbert Gintis (2002).
The Inheritance of Inequality.
In: Journal of Economic Perspectives
16(3)
, 03-30
.
Link.
[close]
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Becker, Gary S. and Nigel Tomes (1979).
An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility.
In: Journal of Political Economy
87(6)
, 1153-1189
.
Abstract.
Link.
The theory of inequality and intergenerational mobility presented in this essay assumes that each family maximizes a utility function spanning several generations. Utility depends on the consumption of parents and on the quantity and quality of their children. The income of children is raised when they receive more human and nonhuman capital from their parents. Their income is also raised by their "endowment" of genetically determined race, ability, and other characteristics, family reputation and "connections," and knowledge, skills, and goals provided by their family environment. The fortunes of children are linked to their parents not only through investments but also through these endowments acquired from parents (and other family members). The equilibrium income of children is determined by their market and endowed luck, the own income and endowment of parents, and the two parameters, the degree of inheritability and the propensity to invest in children. If these parameters are both less than unity, the distribution of income between families approaches a stationary distribution. The stationary coefficient of variation is greater, the larger the degree of in-heritability and the smaller the propensity to invest in children. Intergenerational mobility measures the effect of a family on the well-being of its children. We show that the family is more important when the degree of inheritability and the propensity to invest are larger. If both these parameters are less than unity, an increase in family income in one generation has negligible effects on the incomes of much later descendants. However, the incomes of children, grandchildren, and other early descendants could significantly increase; indeed, if the sum of these parameters exceeds unity, the changes in income rise for several generations before falling, and the maximum increase in income could exceed the initial increase. [close]
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Loury, Glenn C. (1981).
Intergenerational Transfers and the Distribution of Earnings.
In: Econometrica
49(4)
, 843-867
.
Abstract.
Link.
This paper models the dynamics of the earnings distribution among successive generations of workers as a stochastic process. The process arises from the random assignment of abilities to individuals by nature, together with the utility maximizing bequest decisions of their parents. A salient feature of the model is that parents cannot borrow to make human capital investments in their offspring. Consequently the allocation of training resources among the young people of any generation depends upon the distribution of earnings among their parents. This implies in turn that the often noted conflict between egalitarian redistributive policies and economic efficiency is mitigated. A number of formal results are proven which illustrate this fact. [close]
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Becker, Gary S. and Nigel Tomes (1986).
Human Capital and the Rise and Fall of Families.
In: Journal of Labor Economics
4(3)
, 01-39
.
Abstract.
Link.
This paper develops a model of the transmission of earnings, assets, and consumption from parents to descendants. The model assumes utility-maximizing parents who are concerned about the welfare of their children. The degree of intergenerational mobility is determined by the interaction of this utility-maximizing behavior with investment and consumption opportunities in different gene rations and with different kinds of luck. The authors examine a number of empirical studies for different countries. Regression to the mean in earnings in rich countries appears to be rapid. Almost all the earnings advantages or disadvantages of ancestors are wiped out in three generations. [close]
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Becker, Gary S. and H. Gregg Lewis (1973).
On the Interaction between the Quantity and Quality of Children.
In: Journal of Political Economy
81(2)
, 279-288
.
Link.
[close]
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Piopiunik, Marc (2014).
Intergenerational Transmission of Education and Mediating Channels: Evidence from a Compulsory Schooling Reform in Germany.
In: Scandinavian Journal of Economics
116(3)
, 878-907
.
Abstract.
Link.
In this paper, I estimate the causal effect that an additional year of schooling for parents has on their children's education, by exploiting a compulsory schooling reform that was implemented in all West German states between 1946 and 1969. Although previous research indicates that the reform had no effect on earnings, I find that an additional year of schooling for women strongly affects the education of their sons. There is no effect for the other parent–child gender pairs. I investigate numerous channels that might mediate the positive effect of the education of mothers. Most importantly, I find that individuals with more schooling value their children's educational success as more important. [close]
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Aaronson, Daniel and Bhashkar Mazumder (2008).
Intergenerational Economic Mobility in the United States, 1940 to 2000.
In: Journal of Human Resources
43(1)
, 139-172
.
Abstract.
Link.
We estimate trends in intergenerational economic mobility by matching men in the Census to synthetic parents in the prior generation. We find that mobility increased from 1950 to 1980 but has declined sharply since 1980. While our estimator places greater weight on location effects than the standard intergenerational coefficient, the size of the bias appears to be small. Our preferred results suggest that earnings are regressing to the mean more slowly now than at any time since World War II, causing economic differences between families to become more persistent. However, current rates of positional mobility appear historically normal. [close]
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Ammermueller, Andreas (2013).
Institutional Features of Schooling Systems and Educational Inequality: Cross-Country Evidence from PIRLS and PISA.
In: German Economic Review
14(2)
, 190-213
.
Abstract.
Link.
Educational opportunities determine the intergenerational mobility of human capital and affect the distribution of earnings on the labour market. This paper aims at explaining cross-country differences in educational opportunities by features of schooling systems. The theoretical model predicts that a greater differentiation of the schooling system as indicated by streaming and a large share of private schools decreases educational opportunities while more instruction time increases educational opportunities. The empirical results that are based on a difference-in-differences estimation approach to control for country-specific effects support these hypotheses. [close]
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Björklund, Anders, Mikael Lindahl and Erik Plug (2006).
The Origins of Intergenerational Associations: Lessons from Swedish Adoption Data.
In: Quarterly Journal of Economics
121(3)
, 999-1028
.
Abstract.
Link.
We use unique Swedish data with information on adopted children's biological and adoptive parents to estimate intergenerational mobility associations in earnings and education. We argue that the impact from biological parents captures broad prebirth factors, including genes and prenatal environment, and the impact from adoptive parents represents broad postbirth factors, such as childhood environment. We find that both pre- and postbirth factors contribute to intergenerational earnings and education transmissions, and that prebirth factors are more important for mother's education and less important for father's income. We also find some evidence for a positive interaction effect between postbirth environment and prebirth factors. [close]
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Bauer, Philipp and Regina T. Riphahn (2006).
Timing of School Tracking as a Determinant of Intergenerational Transmission of Education.
In: Economics Letters
91(1)
, 90-97
.
Abstract.
Link.
We test with Swiss data whether intergenerational educational mobility is affected by the time at which pupils are first streamed in secondary school. Late tracking significantly affects mobility and reduces the relative advantage of children of better educated parents. [close]
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Black, Sandra E., Paul J. Devereux and Kjell G. Salvanes (2009).
Like father, like son? A note on the intergenerational transmission of IQ scores.
In: Economics Letters
105(1)
, 138-140
.
Abstract.
Link.
Using a large population-based dataset, we estimate a substantial intergenerational transmission of IQ scores; a 10% increase in father's score at age 18 is associated with a 3.2% increase in son's score. This relationship also holds true for various subpopulations. [close]
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Black, Sandra E., Paul J. Devereux (2011).
Recent Developments in Intergenerational Mobility.
In: Ashenfelter, Orley and David Card (eds.).
Handbook of Labor Economics, Vol. 4, Part B.
Amsterdam:
North Holland
, 1487-1541
.
Link.
[close]
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Goldin, Claudia and Lawrence F. Katz (2008).
Transitions: Career and Family Life Cycles of the Educational Elite.
In: American Economic Review
98(2)
, 363-369
.
Abstract.
Link.
Among life’s most vital transitions are those concerning family and career. We decide when and whom to marry, how many children to have, whether to further our education, and which occupations and jobs to pursue. Fundamental aspects of these transitions began to change around the early 1970s for the college educated generally, and for women in particular. The median age at first marriage among college graduate women, which had been stable at about 22.5 years old from the 1950s to the early 1970s (for birth cohorts from the 1930s to about 1950), increased by 2.5 years between 1972 and 1979 (for birth cohorts from about 1950 to 1955). The fraction of women not having a first birth by around 40 years old increased from 20 percent for those graduating in the early 1960s, to 28 percent for those graduating in the 1970s. College graduate women greatly increased their education in professional schools; the fraction female among first-year law and medical school students, for example, was 10 percent in 1970 but rose to 40 percent by 1990. Marriage age and fraction female among first-year professional students are from Goldin and Katz (2002). Fractions not having a first birth among all female college graduates are from the Current Population Report Fertility Supplements and refer to the average for the 35- to 44-yearold group. Gender Differences in Careers, Education, and Games† Transitions: Career and Family Life Cycles of the Educational Elite By Claudia Goldin and Lawrence F. Katz* A considerable amount is known regarding family and career transitions among cohorts of college graduates during much of the past century. But far less is known about whether these transitions have been similar for those who graduated from the more selective institutions of higher education. Focusing on more selective institutions is also called for by many recent issues. Among them is the discussion of “opting out” in the popular literature, which has concerned the possibility that female graduates of highly selective colleges squander their education. In addition, we do not know if the narrowing of the gender gap in earnings has also occurred among those in the upper tail of the educational distribution. We ask whether the general trends of the past three decades in family and career transitions can be observed, as well, among those graduating from one of the most elite institutions of higher education. We also explore the trade-offs between family and career, particularly for college graduate women. [close]
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Hirvonen, Lalaina H. (2008).
Intergenerational Earnings Mobility Among Daughters and Sons, Evidence from Sweden and a Comparison with the United States.
In: American Journal of Economics and Sociology
67(5)
, 777-826
.
Abstract.
Link.
This article adopts Chadwick and Solon's (2002) model by using family earnings in the study of intergenerational earnings mobility with a highlight on the role of assortative mating. I analyze mean and quantile regression coefficients as well as transition matrices to investigate family earnings mobility between parents and daughters and parents and sons from Swedish register data. My findings indicate that Sweden has a higher degree of mobility compared to the United States, and that assortative mating also plays an important role as a channel through which income status is transmitted across generations in Sweden. However, the difference in intergenerational mobility patterns between the two countries does not, inherently, depend on factors that affect the marriage match. Swedish daughters and sons exhibit a rather similar scheme of intergenerational earnings transmission. Daughters tend to be slightly more mobile than sons, and the difference between their elasticity estimates is small but statistically significant. The quantile regression approach reveals that parents' family earnings are less important as an explanatory variable at the upper end of the children's earnings distribution than they are at the bottom, while transition matrices show substantial earnings persistence in the top earnings class. [close]
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Cunha, Flavio and James J. Heckman (2008).
Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation.
In: Journal of Human Resources
43(4)
, 738-782
.
Abstract.
Link.
This paper estimates models of the evolution of cognitive and noncognitive skills and explores the role of family environments in shaping these skills at different stages of the life cycle of the child. Central to this analysis is identification of the technology of skill formation. We estimate a dynamic factor model to solve the problem of endogeneity of inputs and multiplicity of inputs relative to instruments. We identify the scale of the factors by estimating their effects on adult outcomes. In this fashion we avoid reliance on test scores and changes in test scores that have no natural metric. Parental investments are generally more effective in raising noncognitive skills. Noncognitive skills promote the formation of cognitive skills but, in most specifications of our model, cognitive skills do not promote the formation of noncognitive skills. Parental inputs have different effects at different stages of the child’s life cycle with cognitive skills affected more at early ages and noncognitive skills affected more at later ages. [close]
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Black, Sandra, Paul J. Devereux and Kjell G. Salvanes (2007).
From the Cradle to the Labor Market? The Effect of Birth Weight on Adult Outcomes.
In: Quarterly Journal of Economics
122(1)
, 409-439
.
Abstract.
Link.
Lower birth weight babies have worse outcomes, both short-run in terms of one-year mortality rates and longer run in terms of educational attainment and earnings. However, recent research has called into question whether birth weight itself is important or whether it simply reflects other hard-to-measure characteristics. By applying within twin techniques using an unusually rich dataset from Norway, we examine the effects of birth weight on both short-run and long-run outcomes for the same cohorts. We find that birth weight does matter; despite short-run twin fixed effects estimates that are much smaller than OLS estimates, the effects on longer-run outcomes such as adult height, IQ, earnings, and education are significant and similar in magnitude to OLS estimates. [close]
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Bleakley, Hoyt and Aimee Chin (2008).
What Holds Back the Second Generation? The Intergenerational Transmission of Language Human Capital Among Immigrants.
In: Journal of Human Resources
43(2)
, 267-298
.
Abstract.
Link.
In 2000 Census microdata, various outcomes of second-generation immigrants are related to their parents’ age at arrival in the United States, and in particular whether that age fell within the "critical period" of language acquisition. We interpret this as an effect of the parents’ English-language skills and construct an instrumental variable for parental English proficiency. Estimates of the effect of parents’ English-speaking proficiency using two-stage least squares yield significant, positive results for children’s English-speaking proficiency and preschool attendance, and significant, negative results for dropping out of high school and being below age-appropriate grade. [close]
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Casey, Teresa and Christian Dustman (2008).
Intergenerational Transmission of Language Capital and Economic Outcomes.
In: Journal of Human Resources
43(3)
, 660-687
.
Abstract.
Link.
This paper investigates the intergenerational transmission of language capital among immigrants, and the effect of language deficiencies on the economic performance of second-generation immigrants. Using a long panel that oversamples immigrants, we can follow their children after they have left the parental home. Our results show a sizeable significant association between parents’ and children’s fluency, conditional on parental and family characteristics. We find that language deficiencies of the second generation are associated with poorer labor market outcomes for females only. Finally, we find a strong relationship between parental fluency and female labor market outcomes, which works through the child’s language proficiency. [close]
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Doyle, Joseph. J. Jr. (2007).
Child Protection and Child Outcomes: Measuring the Effects of Foster Care.
In: American Economic Review
97(5)
, 1583-1610
.
Abstract.
Link.
Little is known about the effects of placing children who are abused or neglected into foster care. This paper uses the placement tendency of child protection investigators as an instrumental variable to identify causal effects of foster care on long-term outcomes—including juvenile delinquency, teen motherhood, and employment—among children in Illinois where a rotational assignment process effectively randomizes families to investigators. Large marginal treatment effect estimates suggest caution in the interpretation, but the results suggest that children on the margin of placement tend to have better outcomes when they remain at home, especially older children. [close]
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Dustmann, Christia (2008).
Return Migration, Investment in Children, and Intergenerational Mobility: Comparing Sons of Foreign- and Native-Born Fathers.
In: Journal of Human Ressources
43(2)
, 299-324
.
Abstract.
Link.
This paper studies parental investment in education and intergenerational earnings mobility for father-son pairs with native- and foreign-born fathers. We illustrate within a simple model that for immigrants, investment in their children is related to their return migration probability. In our empirical analysis, we include a measure for return probabilities, based on repeated information about migrants’ return intentions. Our results suggest that educational investments in the son are positively associated with a higher probability of a permanent migration of the father. We also find that the son’s permanent wages are positively associated with the probability of the father’s permanent migration. [close]
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Doyle, Joseph. J. Jr. (2008).
Child Protection and Adult Crime: Using Investigator Assignment to Estimate Causal Effects of Foster Care.
In: Journal of Political Economy
116(4)
, 746-770
.
Abstract.
Link.
This paper uses the randomization of families to child protection investigators to estimate causal effects of foster care on adult crime. The analysis uses a new data set that links criminal justice data to child protection data in Illinois, and I find that investigators affect foster care placement. Children on the margin of placement are found to be two to three times more likely to enter the criminal justice system as adults if they were placed in foster care. One innovation describes the types of children on the margin of placement, a group that is more likely to include African Americans, girls, and young adolescents. [close]
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Han, Song and Casey B. Mulligan (2001).
Human Capital, Heterogeneity and Estimated Degrees of Intergenerational Mobility.
In: Economic Journal
111(470)
, 207-243
.
Abstract.
Link.
Some of the important implications of the parental investment model of intergenerational mobility have been derived under the assumption that parental income is the main source of heterogeneity. We explicitly model the variability and inheritability of innate' earnings ability and the variability of tastes, showing how they affect observed degrees of intergenerational consumption and earnings mobility. Heterogeneity increases the difficulty of detecting the existence of borrowing constrained families. Conversely, the presence of heterogeneity means that economic and linear statistical models of inheritance generate similar intergenerational data on consumption and earnings. In this sense, our findings offer some support for Goldberger's (1989) criticism of human capital models of inheritance. Finally, we suggest that any cross-country differences in intergenerational earnings mobility are more readily interpreted according to the heterogeneity of inherited ability, rather than optimal family responses to country-specific institutions for accumulating human capital. [close]
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Black, Sandra, Paul Devereux and Kjell G. Salvanes (2005).
Why the Apple Doesn't Fall Far: Understanding Intergenerational Transmission of Human Capital.
In: American Economic Review
95(1)
, 437-449
.
Abstract.
Link.
Parents with higher education levels have children with higher education levels. However, is this because parental education actually changes the outcomes of children, suggesting an important spillover of education policies, or is it merely that more able individuals who have higher education also have more able children? This paper proposes to answer this question by using a unique dataset from Norway. Using the reform of the education system that was implemented in different municipalities at different times in the 1960s as an instrument for parental education, we find little evidence of a causal relationship between parents’ education and children’s education, despite significant OLS relationships. We find 2SLS estimates that are consistently lower than the OLS estimates with the only statistically significant effect being a positive relationship between mother's education and son's education. These findings suggest that the high correlations between parents’ and children’s education are due primarily to selection and not causation. [close]
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Pekkarinen, Tuomas, Roope Uusitalo and Sari Kerr (2009).
School tracking and intergenerational income mobility: Evidence from the Finnish comprehensive school reform.
In: Journal of Public Economics
93(7-8)
, 965-973
.
Abstract.
Link.
This paper estimates the effect of a major education reform on intergenerational income mobility. The Finnish comprehensive school reform of 1972–1977 replaced the old two-track school system with a uniform nine-year comprehensive school and shifted the selection of students to vocational and academic tracks from age 11 to age 16. We estimate the effect of this reform on the intergenerational income elasticity using a representative sample of males born between 1960 and 1966. The identification strategy relies on a differences-in-differences approach and exploits the fact that the reform was implemented gradually across the country during a six-year period. The results indicate that the reform reduced the intergenerational income elasticity by 23% from the pre-reform elasticity of 0.30 to post-reform elasticity of 0.23. [close]
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Miller, Amalia R. (2009).
Motherhood Delay and the Human Capital of the Next Generation.
In: American Economic Review
99(2)
, 154-158
.
Abstract.
Link.
This paper exploits biological fertility shocks as instrumental variables to estimate the causal effect of motherhood delay on the cognitive ability of the next generation. Using detailed panel data on women in the NLSY79 and their first-born children aged 5 to 14, we find that a year of delay leads to significant increases in math and reading scores: a 7 year delay produces gains on par with the black-white score difference. These results reveal a potential weakness of pro-natalist policies that promote early motherhood. While such policies may succeed at increasing total period fertility rates, they will be less effective at increasing total human capital. [close]
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Del Rey, Elena and María Racionero (2002).
Optimal educational choice and redistribution when parental education matters.
In: Oxford Economic Papers
54(3)
, 435-448
.
Abstract.
Link.
Higher education plays an important role in determining lifetime earnings. In turn, the decision to become educated depends to a large extent on family characteristics, such as wealth and education. In this paper, we focus on the interaction between fiscal policies and educational choices when parental education matters. We derive optimality conditions for a linear income tax and a lump‐sum subsidy for education in a dynamic framework in which generations are linked by educational background. The factors that determine their sign and magnitude include concerns for redistribution, efficiency, and the educational externality on future generations. [close]
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Segal, Carmit (2008).
Classroom Behavior.
In: Journal of Human Ressources
43(4)
, 783-814
.
Abstract.
Link.
This paper investigates the determinants and malleability of noncognitive skills. Using data on boys from the National Education Longitudinal Survey, I focus on youth behavior in the classroom as a measure of noncognitive skills. I find that student behavior during adolescence is persistent. The variation in behavior can be attributed to unobserved individual heterogeneity. Family and school characteristics, as well as the incentives for good behavior provided at home and in school, are important determinants of behavior. Neither the cross-sectional variation in behavior nor the variation over time in behavior can, however, be attributed to these covariates. [close]
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Chadwick, Laura and Gary Solon (2002).
Intergenerational Income Mobility Among Daughters.
In: American Economic Review
92(1)
, 335-344
.
Link.
[close]
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Checchi, Daniele, Andrea Ichino and Aldo Rustichini (1999).
More Equal But Less Mobile? Education Financing and Intergenerational Mobility in Italy and in the US.
In: Journal of Public Economics
74(3)
, 351-393
.
Abstract.
Link.
A centralised and egalitarian school system reduces the cost of education for poor families, and so it should reduce income inequality and make intergenerational mobility easier. In this paper we provide evidence that Italy, compared to the USA, displays less income inequality, as expected given the type of school system, but also less intergenerational upward mobility between occupations and between education levels. We explore some of the reasons which can explain this puzzling result and conclude that in a world in which family background is important for labor market success, a centralised and egalitarian tertiary education does not necessarily help poor children and may take away from them a fundamental tool to prove their talent and to compete with rich children. [close]
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Mulligan, Casey B. (1999).
Galton versus the Human Capital Approach to Inheritance.
In: Journal of Political Economy
107(S6)
, 184-224
.
Abstract.
Link.
The field of biology offers a simple but serious competitor to Gary Becker's theory of the intergenerational transmission of inequality. Many economists have utilized Gary's model to analyze important empirical and policy questions but none have shown that the economic approach dominates Galton's approach from a positive point of view. I derive ten implications of the human capital approach which are distinct from Galton's and provide evidence on nine of them. The evidence includes my own analysis of the PSID, SCF, and NLSY micro data sets as well as references to results reported in previous literatures. Five of the uniquely economic implications appear to be refuted. Three implications are verified - although one is rather trivial - while mixed results are obtained for a ninth implication. [close]
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Dearden, Lorraine, Stephen Machin and Howard Reed (1997).
Intergenerational Mobility in Britain.
In: Economic Journal
107(1)
, 47-66
.
Abstract.
Link.
The prediction approach proposed by Dearden, Machin and Reed (DMR) consists in (1) regressing the observed incomes of the child and parent families on separate sets of predetermined variables, and (2) regressing the child's predicted income on that of the parents. Conceptually, this estimator must relate to the 2SLS/IV estimator. We re-derive the prediction estimator in matrix form, and reconsider its consistency requirements. The measurement model of DMR is then embedded within a simultaneous equations framework, for which an alternative 2SLS/IV estimator is proposed. The latter produces larger estimates for the intergenerational correlation. The policy relevance of the two sets of findings are then discussed. [close]
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Tomes, Nigel (1981).
The Family, Inheritance, and the Intergenerational Transmission of Inequality.
In: Journal of Political Economy
89(5)
, 928-958
.
Abstract.
Link.
This paper provides estimates of the correlation in lifetime earnings between fathers and sons. Intergenerational data from the National Longitudinal Survey are used. Earlier studies, conducted for the United States, report elasticities of children's earnings with respect to parent's earnings of 0.2 or less, suggesting extensive integenerational mobility. These estimates, however, are biased downward by error-contaminated measures of lifetime economic status. Estimates presented in this paper correct for the problem of measurement error and find the intergenerational correlation in income to be on the order of 0.4. This suggests considerably less intergenerational mobility than previously believed. [close]
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Zimmerman, David J. (1992).
Regression Towards Mediocrity in Economic Status.
In: American Economic Review
82(3)
, 409-429
.
Abstract.
Link.
This paper provides estimates of the correlation in lifetime earnings between fathers and sons. Intergenerational data from the National Longitudinal Survey are used. Earlier studies, conducted for the United States, report elasticities of children's earnings with respect to parent's earnings of 0.2 or less, suggesting extensive integenerational mobility. These estimates, however, are biased downward by error-contaminated measures of lifetime economic status. Estimates presented in this paper correct for the problem of measurement error and find the intergenerational correlation in income to be on the order of 0.4. This suggests considerably less intergenerational mobility than previously believed. [close]
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Solon, Gary (1992).
Intergenerational Income Mobility in the United States.
In: American Economic Review
82(3)
, 393-408
.
Abstract.
Link.
Social scientists and policy analysts have long expressed concern about the extent of intergenerational income mobility in the United States, but remarkably little empirical evidence is available. The few existing estimates of the intergenerational correlation in income have been biased downward by measurement error, unrepresentative samples, or both. New estimates based on intergenerational data from the Panel Study of Income Dynamics imply that the intergenerational correlation in long-run income is at least 0.4, indicating dramatically less mobility than suggested by earlier research. Copyright 1992 by American Economic Association. [close]
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Björklund, Anders and Markus Jäntti (1997).
Intergenerational Income Mobility in Sweden Compared to the United States.
In: American Economic Review
87(5)
, 1009-1018
.
Link.
[close]
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Arrow, Kenneth, Samuel Bowles and Steven Durlauf (2000).
Meritocracy and Economic Inequality.
Princeton:
Princeton University Press
.
Abstract.
Link.
Most Americans strongly favor equality of opportunity if not outcome, but many are weary of poverty's seeming immunity to public policy. This helps to explain the recent attention paid to cultural and genetic explanations of persistent poverty, including claims that economic inequality is a function of intellectual ability, as well as more subtle depictions of the United States as a meritocracy where barriers to achievement are personal--either voluntary or inherited--rather than systemic. This volume of original essays by luminaries in the economic, social, and biological sciences, however, confirms mounting evidence that the connection between intelligence and inequality is surprisingly weak and demonstrates that targeted educational and economic reforms can reduce the income gap and improve the country's aggregate productivity and economic well-being. It also offers a novel agenda of equal access to valuable associations.
Amartya Sen, John Roemer, Robert M. Hauser, Glenn Loury, Orley Ashenfelter, and others sift and analyze the latest arguments and quantitative findings on equality in order to explain how merit is and should be defined, how economic rewards are distributed, and how patterns of economic success persist across generations. Moving well beyond exploration, they draw specific conclusions that are bold yet empirically grounded, finding that schooling improves occupational success in ways unrelated to cognitive ability, that IQ is not a strong independent predictor of economic success, and that people's associations--their neighborhoods, working groups, and other social ties--significantly explain many of the poverty traps we observe.
The optimistic message of this beautifully edited book is that important violations of equality of opportunity do exist but can be attenuated by policies that will serve the general economy. Policy makers will read with interest concrete suggestions for crafting economically beneficial anti-discrimination measures, enhancing educational and associational opportunity, and centering economic reforms in community-based institutions. Here is an example of some of our most brilliant social thinkers using the most advanced techniques that their disciplines have to offer to tackle an issue of great social importance. [close]
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Gottschalk Peter and Timothy Smeeding (1997).
Cross-National Comparisons of Earnings and Income Inequality.
In: Journal of Economic Literature
35(2)
, 633-687
.
Abstract.
Link.
This article reviews the evidence on cross-national comparisons of earnings and income inequality in OECD countries. It begins with a series of stylized facts which are then examined and supported by recent studies in the field. Economic, demographic, institutional and policy-related influences on earnings and income distribution are reviewed. The paper concludes with a call for more work on empirically testable structural models of household income distribution. [close]
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The Oxford Review of Economic Policy Ltd (ed.) (2004).
Oxford Review of Economic Policy 20(2), Issue on Education.
In: Oxford Review of Economic Policy
20(2)
, 157-333
.
Link.
[close]
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Juhn, Chinhui, Kevin M. Murphy and Brooks Pierce (1993).
Wage Inequality and the Rise in Returns to Skill.
In: Journal of Political Economy
101(3)
, 410-442
.
Abstract.
Link.
Using data from the March Current Population Survey, we document an increase over the past 30 years in wage inequality for males. Between 1963 and 1989, real average weekly wages for the least skilled workers (as measured by the tenth percentile of the wage distribution) declined by about 5 percent, whereas wages for the most skilled workers (as measured by the ninetieth percentile of the wage distribution) rose by about 40 percent. We find that the trend toward increased wage inequality is apparent within narrowly defined education and labor market experience groups. Our interpretation is that much of the increase in wage inequality for males over the last 20 years is due to increased returns to the components of skill other than years of schooling and years of labor market experience. Our primary explanation for the general rise in returns to skill is that the demand for skill rose in the United States over this period. [close]
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Gradstein, Mark and Moshe Justman (2002).
Education, Social Cohesion and Economic Growth.
In: American Economic Review
92(4)
, 1192-1204
.
Abstract.
Link.
Analysis of the contribution of education to growth through its role in promoting a common culture indicates that when different cultural groups separately determine the social content of their school curricula excessive polarization can result, with less than optimal growth. The optimal trajectory involves a gradual, reciprocal convergence of school curricula towards the middle ground. This may be difficult to implement in a political context in which all agents are identified with one group or another. When curricula are determined by legislative bargaining, centralization of schooling may result in overly rapid homogenization in some cases, and - perhaps surprisingly - excessive polarization in others. [close]
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Bénabou, Roland (2000).
Unequal Societies: Income Distribution and the Social Contract.
In: American Economic Review
90(1)
, 96-129
.
Abstract.
Link.
This paper develops a theory of inequality and the social contract aiming to explain how countries with similar economic and political "fundamentals" can sustain such different systems of social insurance, fiscal redistribution, mid education finance as those. of the United States and Western Europe. With imperfect credit and insurance markets some redistributive policies can improve ex ante welfare, and this implies that their political support tends to decrease with inequality. Conversely, with credit constraints, lower redistribution translates into more persistent inequality; hence the potential for multiple study states, with mutually reinforcing high inequality and low redistribution, or vice versa. [close]
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O'Neill, Donal (1995).
Education and Income Growth: Implications for Cross-Country Inequality.
In: Journal of Political Economy
103(6)
, 1289-1301
.
Abstract.
Link.
This paper examines the extent to which patterns of human capital convergence can account for observed patterns of income inequality between countries. The author decomposes national income into three components: one due to education levels, one reflecting the return to education, and a residual component. He then examines the contribution of each to changes in income dispersion. Among the developed countries, convergence in education levels has resulted in a reduction in income dispersion. However, for the world as a whole, incomes have diverged despite substantial convergence in education levels. [close]
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Corak, Miles (ed.) (2004).
Generational Income Mobility in North America and Europe.
Cambridge:
Cambridge University Press
.
Abstract.
Link.
Labour markets in North America and Europe have changed tremendously in the face of increased globalization and technical progress, raising important challenges for policy makers concerned with equality of opportunity. This book examines the influence of both changes in income inequality and of social policies on the degree to which economic advantage is passed on between parents and children in the rich countries. Standard theoretical models of generational dynamics are extended to examine generational income and earnings mobility over time and across space. Twenty contributors from North America and Europe offer comparable estimates of the degree of mobility, how it has changed through time, and the impact of government policy. In so doing, they extend the analytical tool kit used in the study of generational mobility, and offer insights for not only the conduct of future research but also directions for policies dealing with equality of opportunity and child poverty. [close]
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Björklund, Anders, Per-Anders Edin, Peter Fredriksson and Alan Krueger (2004).
Education, Equality and Efficiency: An Analysis of Swedish School Reforms during the 1990s.
IFAU Report 2004:1.
Abstract.
Link.
The Swedish school system is in crises. That is often the impression one has gotten from Swedish media reports about education policy in the last 10-15 years. During the same period the Swedish school system has undergone rapid changes. This notion of a school system in severe crises is the starting point for this report. We will examine Swedish education policy with special focus on the turbulent reform period during the 1990s. We focus on two very established goals for education policy: equality and efficiency. Ever since the early introduction of the compulsory school in 1842, egalitarian goals have been important ones in Swedish education policy. A reading of a more recent policy document by the present government – see Regeringens skrivelse 2001/02: 188 – reveals that even the egalitarian goals for education policy are multifaceted. In general, though, one can distinguish between two main egalitarian goals, namely equality of outcomes and equality of opportunity. The ambition to influence the distribution of outcomes, e.g., cognitive skills, has been evident in many ways. First of all, the compulsory schooling system has gradually become more comprehensive so that all pupils are kept together in one class with a similar curriculum. Further, extra resources have been allocated to pupils with special needs, such as handicapped pupils and immigrant children. The ambition to equalize opportunities has generally been interpreted as an ambition to reduce the importance of pupils’ family background for their subsequent educational attainment. In fact, in their thorough report to government Erikson and Jonsson (1993) note that politicians have also stressed efficiency arguments in favor of a policy that may weaken the direct link between family background and educational attainment. One popular expression has been to “mobilize the reserve of talents” among children with a family background without educational tradition. Economists would rather talk about policies that eliminate “credit constraints” that low-income families face when their children are contemplating longer education. Through the 1980s, Sweden appeared to have been quite successful in terms of overall economic equality. At least according to readily available measures like hourly wages and annual disposable household income, Sweden generally ranked high in cross-country comparisons of equality.1 Comparisons of equality based on long-run measures of earnings and income are more complicated, but the available evidence suggests the same cross-country patterns as found in point-in-time data.2 However, education policy’s contribution to these egalitarian outcomes is more of an unsettled issue. The period since 1990 has been turbulent in many respects. At the macroeconomic level, the decade started with the most severe economic downturn since the 1930s. Unemployment rose from two percent to almost ten percent in just three years. As a consequence, public budgets deteriorated when tax revenue fell and expenditures to support the unemployed rose. Before the end of the decade, these deficits had been eliminated, partly by reductions of expenditures that also affected Swedish schools. During the 1990s, Sweden also implemented “the tax reform of the century”3, entered the European Union, settled successfully for low inflation, and deregulated many markets. Further, both hourly earnings and disposable income inequality started to rise. The 1990s was a turbulent decade for Swedish education policy too. Although, some policy initiatives, like an expansion of adult “second-chance” education, were motivated by traditional egalitarian arguments, many changes occurred that were unexpected for those who followed the Swedish discussion during previous decades. Education policy is our focus in this report. Before we summarize the reforms in Swedish education policy during the 1990s, we offer a brief description of the Swedish schooling system around 1990. [close]
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Bauer, Philipp C. and Regina T. Riphahn (2013).
Institutional Determinants of Intergenerational Education Transmission - Comparing Alternative Mechanisms for Natives and Immigrants.
In: Labour Economics
25
, 110-122
.
Abstract.
Link.
We use census data on 26 Swiss cantons to determine the association of educational institutions with the intergenerational transmission of education. We test whether education transmission is higher when children enter kindergarten and school earlier and when tracking occurs at a later age. In contrast to the literature we consider the three institutions jointly. Our results generally confirm the expected correlation patterns. Among second generation immigrants, the age at enrollment in kindergarten is most closely associated with educational mobility. Among natives, late tracking is most strongly and positively associated with educational mobility. Our results are robust to various alternative specifications. [close]
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Woessmann, Ludger (2008).
How Equal Are Educational Opportunities? Family Background and Student Achievement in Europe and the United States.
In: Zeitschrift für Betriebswirtschaft
78(1)
, 45-70
.
Abstract.
Link.
This paper estimates the effects of family-background characteristics on student performance in the US and 17 Western European school systems. Family background has strong effects both in Europe and the United States, remarkably similar in size. France and Flemish Belgium achieve the most equitable performance for students from different family backgrounds, and Britain and Germany the least. Equality of opportunities is unrelated to countries’ mean performance. Quantile regressions show little variation in family-background effects across the ability distribution in most countries. [close]
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Galor, Oded (2011).
Inequality, Human Capital Formation and the Process of Development.
In: Eric A. Hanushek, Stephen Machin and Ludger Woessmann (eds.).
Handbook of the Economics of Education, Vol. 4.
Amsterdam:
North-Holland
, 441-493
.
Abstract.
Link.
Conventional wisdom about the relationship between income distribution and economic development has been subjected to dramatic transformations in the past century. While Classical economists advanced the hypothesis that inequality is beneficial for economic development, the Neoclassical paradigm, which had subsequently dominated the field of macroeconomics, dismissed the Classical hypothesis and promoted the viewpoint that the study of income distribution has no importance for the understanding of macroeconomic activity and the growth process. A metamorphosis in these perspectives has taken place in the past two decades. Theory and subsequent empirical evidence have demonstrated that income distribution has a significant impact on the growth process.
The modern approach has demonstrated that in the presence of credit market imperfections, income distribution has a long-lasting effect on investment in human capital, entrepreneurial activity, aggregate income, and economic development. Moreover, in contrast to the Classical viewpoint, which underscored beneficial effects of inequality for the growth process, the modern perspective advanced the hypothesis that inequality may be detrimental for human capital formation and economic development.
The replacement of physical capital accumulation by human capital accumulation as the prime engine of economic growth has changed the qualitative impact of inequality on the process of development. In early stages of industrialization, as physical capital accumulation was a prime source of economic growth, inequality enhanced the process of development by channeling resources towards individuals whose marginal propensity to save is higher. In later stages of development, however, as human capital has become the main engine of economic growth, a more equal distribution of income, in the presence of credit constraints, has stimulated investment in human capital and economic growth.
While the process of industrialization raised the importance of human capital in the production process, reflecting its complementarity with physical capital and technology, human capital accumulation has not benefited all sectors of the economy. Inequality in the owner- ship of factors of production has generated an incentive for some better-endowed agents to block the implementation of institutional changes and policies that promote human capital formation, resulting in a suboptimal level of investment in human capital from a growth perspective. The transition from an agricultural to an industrial economy changed the nature of the main economic conflict in society. Unlike the agrarian economy, which was characterized by a conflict of interests between the landed aristocracy and the masses, the process of industrialization has brought about an additional conflict between the entrenched landed elite and the emerging capitalist elite. In light of a lower degree of complementarity between human capital and the agricultural sector, education has increased the productivity of labor in industrial production more than in agricultural and primary good production, inducing rural-to-urban migration and a decline in the return to landowners. Thus, while industrialists have had a direct economic incentive to support education policies that would foster human capital formation, landowners, whose interests lay in the reduction of the mobility of their labor force, have favored policies that deprived the masses of education.
The adverse effect of the implementation of public education on landowners' income from agricultural production has been magnified by the concentration of land ownership. As long as landowners affected the political process and thereby the implementation of growth-enhancing education policies, inequality in the distribution of land ownership has been a hurdle for human capital accumulation, slowing the process of industrialization and the transition to modern growth. Variation in the distribution of ownership over land and other natural resources across countries has contributed to disparity in human capital formation and the industrial composition of the economy, and thus to divergent development patterns across the globe. Moreover, in some societies geographical conditions that led to income inequality brought about oppressive institutions designed to maintain the political power of the elite and to preserve the existing inequality. [close]
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Hanushek, Eric and Dennis Kimko (2000).
Schooling, Labor Force Quality, and the Growth of Nations.
In: American Economic Review
90(5)
, 1184-1208
.
Abstract.
Link.
Direct measures of labor-force quality from international mathematics and science test scores are strongly related to growth. Indirect specification tests are generally consistent with a causal link: direct spending on schools is unrelated to student performance differences; the estimated growth effects of improved labor-force quality hold when East Asian countries are excluded; and, finally, home-country quality differences of immigrants are directly related to U.S. earnings if the immigrants are educated in their own country but not in the United States. The last estimates of micro productivity effects, however, introduce uncertainty about the magnitude of the growth effects. [close]
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Castelló, Amparo and Rafael Doménech (2002).
Human Capital Inequality and Economic Growth: Some New Evidence.
In: Economic Journal
112(478)
, C187-C200
.
Abstract.
Link.
This paper provides new measures of human capital inequality for a broad Panel of countries. Taking attainment levels from Barro and Lee (2001), we compute Gini coefficients and the distribution of education by quintiles for 108 countries over five-year intervals from 1960 to 2000. Using this new cross-country data on human capital inequality two main conclusions are obtained. First, most countries in the world have tended to reduce the inequality in human capital distribution. Second, human capital inequality measures provide more robust results than income inequality measures in the estimation of standard growth and investment equations. [close]
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Benhabib, Jess and Mark M. Spiegel (1994).
The Role of Human Capital in Development: Evidence From Aggregate Cross-Country Data.
In: Journal of Monetary Economics
34(2)
, 143-173
.
Abstract.
Link.
Using cross-country estimates of physical and human capital stocks, we run the growth accounting regressions implied by a Cobb-Douglas aggregate production function. Our results indicate that human capital enters insignificantly in explaining per capita growth rates. We next specify an alternative model in which the growth rate of total factor productivity depends on a nation's human capital stock level. Tests of this specification do indicate a positive role for human capital. [close]
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Psacharopoulos, George and Maureen Woodhall (1985).
Education for Development.
New York:
Oxford University Press
.
Abstract.
This book analyzes the policy issues facing educational planners, administrators and policy makers in developing countries in choosing between alternative strategies of educational investment. It draws on the World Bank's twenty years of experience in education sector analysis and research to discuss both theoretical and practical problems of analyzing investment choices. The topics covered include: the contribution of education to economic and human development, criteria for investment, cost-benefit analysis, demand for educated manpower finance, internal efficiency and quality, equity considerations and the links between investment in education and investment in other sectors. No comparable work exists which deals solely with the problems of analyzing education investment in developing countries. While written for those involved in policy formulation and planning, it does not assume a high degree of technical knowledge of economics. [close]
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Schultz, Theodore P. (1998).
Inequality in the Distribution of Personal Income in the World: How It Is Changing and Why.
In: Journal of Population Economics
11(3)
, 307-344
.
Abstract.
Link.
The variance in the logarithms of per capita GDP in purchasing power-parity prices increased in the world from 1960 to 1968 and decreased since the mid 1970s, In the later period the convergence in intercountry incomes more than offset any increase in within country inequality. Approximately two-thirds of this measure of world inequality is intercountry, three-tenths interhousehold within country inequality, and one-twentieth between gender differences in education. If China is excluded from the world sample, the decline in world inequality after 1975 is not evident. Measuring confidently trends in household and gender inequality will require much improved data. [close]
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Knight, John and Richard Sabot (1983).
Educational Expansion and the Kuznets Effect.
In: American Economic Review
73(5)
, 1132-1136
.
Abstract.
Link.
Our objective in this note is to show the change in wage dispersion in response to increases in the relative supply of educated workers in two low-income countries. We also measure the relative contributions to that change of its two components: the effect of the educational expansion on the educational composition of the labor force (holding the educational structure of wages constant), and the resultant compression of what structure (holding composition constant). We base our analysis on three precisely comparable surveys of wage employees conducted in Tanzania in 1971 and 1980, and in Kenya in 1980. [close]
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Trostel, Philip (1993).
The Effect of Taxation on Human Capital.
In: Journal of Political Economy
101(2)
, 327-350
.
Abstract.
Link.
This study finds a significant negative effect of proportional income taxation on human capital. Of the few earlier studies to address this issue, most suggested a negligible effect of taxation on investment on human capital. This earlier conclusion is shown to be incorrect by using a model that is more general in sever al respects than the models used previously. [close]
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Marin, Alan and George Psacharopoulos (1976).
Schooling and Income Distribution.
In: Review of Economics and Statistics
58(3)
, 332-337
.
Abstract.
Link.
In this paper we elaborate on the relationship between schooling and income distribution based on human capital theory. [close]
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Tinbergen, Jan (1972).
The Impact of Education on Income Distribution.
In: Review of Income and Wealth
18(3)
, 255-265
.
Abstract.
Link.
In this paper the author adds some further empirical tests of his theory of income distribution. This theory (cf. this Review, Series 16, Number 3, September 1970, p. 221 ff) sees income distribution as the distribution of prices of production factors, especially labour, of different quality and prices as the effect of demand and supply factors. The quality of labour is represented only by the number of years of schooling. Its supply is described by the actual numbers of people having each of the possible years of schooling; this frequency distribution can be characterized by its average and by some measure of its dispersion or by one of its deciles (in particular the highest) expressed in terms of its median. The demand for the various qualities of labour can be supposed to be reflected by (i) total demand for commodities, but (ii) more accurately by the percentage of third-level educated people used in and weighted by the size of the four main sectors of production: agriculture, manufacturing, trade and transport, and other services. Extensive material collected and reworked by Professors B. R. Chiswick for the U.S.A. and Canada and T. P. Schultz and L. S. Burns with H. E. Frech III for the Netherlands is used in cross-section tests to explain variations in income distribution in the states of the U.S.A. and the provinces of Canada and the Netherlands. The results can be found in the tables. While further increase and smaller dispersion in years of schooling, according to some of the findings presented, would only moderately reduce the degree of inequality in the U.S.A. and Canada, more result seems to be possible according to other findings, including those for the Netherlands. In the latter category the second demand index mentioned above has been used. This paper is one of several devoted in various ways to the testing of the same theory. [close]
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Psacharopoulos, George (1994).
Returns to Investment in Education: A Global Update.
In: World Devlopment
22(9)
, 1325-1343
.
Abstract.
Link.
The paper provides a comprehensive update of the profitability of investment in education at a global scale. The rate of return patterns established in earlier reviews are upheld: namely, that primary education continues to be the number one investment priority in developing countries; the returns decline by the level of schooling and the country's per capita income; investment in women's education is in general more profitable than that for men; returns in the private competitive sector of the economy are higher than among those working in the public sector; and that the public financing of higher education is regressive. The above findings are discussed in the context of controversies in the field, concluding that investment in education continues to be a very attractive investment opportunity in the world today—both from the private and the social point of view. [close]
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Rati, Ram (1984).
Population Increase, Economic Growth, Educational Inequality and Income Distribution: Some Recent Evidence.
In: Journal of Development Economics
14(3)
, 419-428
.
Abstract.
Link.
Using a recent inter-country sample, impacts of population increase, short-run growth rate, and educational level and inequality on income distribution are assessed. As in almost all other studies, high population increase is observed to be a disequalizer. However, unlike the position indicated in several earlier studies, rapid short-run economic growth seems to reduce income inequality. While higher mean schooling level appears to be a mild equalizer, contrary to the results reported by earlier researchers, no adverse effect of educational inequality on income distribution is found. [close]
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Rati, Ram (1990).
Educational Expansion and Schooling Inequality: International Evidence and Some Implications.
In: Review of Economics and Statistics
72(2)
, 266-274
.
Abstract.
Link.
Fairly recent data for about one hundred countries indicate that as the average level of schooling increases, educational inequality first increases and, after reaching a peak, starts declining in later phases of educational expansion. The turning point occurs when average schooling is about seven years. The observed empirical generalization, which seems quite robust, appears to have important implications for educational and distributional policies and for research on the linkage between education and income inequality. [close]
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Saint-Paul, Gilles and Thierry Verdier (1993).
Education, Democracy and Growth.
In: Journal of Development Economics
42(2)
, 399-407
.
Abstract.
Link.
This note presents a model of endogenous growth where redistribution, determined by a political equilibrium, is in the form of public education. It is shown that there need not be a negative relationship between growth and redistribution as public education increases the level of human capital in the conomy and, at the same time, tends to produce a more even income distribution. [close]
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Winegarden, C.R. (1979).
Schooling and Income Distribution: Evidence From International Data.
In: Economica
46(181)
, 83-87
.
Link.
[close]
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Tinbergen, Jan (1975).
Income Differences: Analysis and Policies.
Amsterdam:
North Holland
.
[close]
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Heckman, James, Lance Lochner and Christopher Taber (1998).
Tax Policy and Human Capital Formation.
In: American Economic Review
88(2)
, 293-297
.
Abstract.
Link.
Missing from recent discussions of tax reform is any systematic analysis of the effects of various tax proposals on skill formation. This gap in the literature in empirical public finance is due to the absence of any empirically based general equilibrium models with both human capital formation and physical capital formation that are consistent with observations on modern labor markets. This paper is a progress report on our ongoing research on formulating and estimating dynamic general equilibrium models with endogenous heterogeneous human capital accumulation. Our model explains many features of rising wage inequality in the U.S. economy (James Heckman, Lance Lochner and Christopher Taber, 1998). In this paper, we use our model to study the impacts on skill formation of proposals to switch from progressive taxes to flat income and consumption taxes. For the sake of brevity, we focus on steady states in this paper, although we study both transitions and steady states in our research. [close]
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Glomm, Gerhard and B. Ravikumar (1992).
Public Versus Private Investment in Human Capital - Endogenous Growth and Income Inequality.
In: Journal of Political Economy
100(4)
, 818-834
.
Abstract.
Link.
In this paper, we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth. We use simple functional forms for preferences, technologies, and income distribution to highlight the distinction between economies with public education and those with private education. We find that income inequality declines more quickly under public education. On the other hand, private education yields greater per capita incomes unless the initial income inequality is sufficiently high. We also find that societies will choose public education if a majority of agents have incomes below average. [close]
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Murray, Sheila E., William N. Evans and Robert M. Schwab (1998).
Education-Finance Reform and the Distribution of Education Resources.
In: American Economic Review
88(4)
, 789-812
.
Abstract.
Link.
Between 1971 and 1996 opponents of local funding for public schools successfully challenged the constitutionality of school-finance systems in 16 states. Using the variation across states in the timing of these cases we investigate the impact of reform on the distribution of school resources. Our results suggest that court-ordered finance reform reduced within-state inequality in spending by 19 to 34 percent. Successful litigation reduced inequality by raising spending in the poorest districts while leaving spending in the richest districts unchanged thereby increasing aggregate spending on education. Reform led states to fund additional spending through higher state taxes. [close]
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Boadway, Robin, Nicolas Marceau and Maurice Marchand (1996).
Investment in Education and the Time Inconsistency of Redistributive Tax Policy.
In: Economica
63(259)
, 171-189
.
Abstract.
Link.
Time inconsistency of tax policy is shown to arise in a setting where households differ in their ability to accumulate wealth and where the government has redistributional objectives. It is assumed that wealth accumulation takes the form of human capital acquired through education. The government is precluded from redistributing to a first-best optimum by a self-selection constraint. The second-best is shown to be time-inconsistent. In the time-consistent optimum, households underinvest in education. An argument can be made for public intervention in the provision of education. [close]
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Fernandez, Raquel and Richard Rogerson (1995).
On the Political Economy of Education Subsidies.
In: Review of Economic Studies
62(2)
, 249-262
.
Abstract.
Link.
Standard models of public education provision predict an implicit transfer of resources from higher income individuals toward lower income individuals. Many studies have documented that public higher education involves a transfer in the reverse direction. We show that this pattern of redistribution is an equilibrium outcome in a model in which education is only partially publicly provided and individuals vote over the extent to which it is subsidized. We show that increased inequality in the income distribution makes this outcome more likely and that the efficiency implications of this exclusion depend on the wealth of the economy. [close]
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Gottschalk, Peter and Timothy Smeeding (1997).
Cross-National Comparisons of Earnings and Income Inequality.
In: Journal of Economic Literature
35(2)
, 633-687
.
Abstract.
Link.
This article reviews the evidence on cross-national comparisons of earnings and income inequality in OECD countries. It begins with a series of stylized facts which are then examined and supported by recent studies in the field. Economic, demographic, institutional and policy-related influences on earnings and income distribution are reviewed. The paper concludes with a call for more work on empirically testable structural models of household income distribution. [close]
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Fernandez, Raquel and Richard Rogerson (1996).
Income Distribution, Communities and the Quality of Public Education.
In: Quarterly Journal of Economics
111(1)
, 135-164
.
Abstract.
Link.
The paper analysis within the context of a multicommunity model the effects of several policies that affect the financing of public education. The key features of the model are: (i) individuals differ with respect to income, (ii) individuals choose in which community to reside, (iii) communities are characterized by a proportional tax on income and a quality of public education, and (iv) a communitie’s tax rate is chosen by majority vote. [close]
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Park, Kang (1996).
Educational Expansion and Educational Inequality on Income Distribution.
In: Economics of Education Review
15(1)
, 51-58
.
Abstract.
Link.
This study examines the effects of educational variables on income distribution using cross-section data covering 59 countries. The empirical results show that a higher level of educational attainment of the labor force has an equalizing effect on income distribution, while the larger the dispersion of educational attainment among the labor force, the greater the income inequality. It is also found that the dispersion of schooling among the labor force has a much greater disequalizing effect on income equality than previous studies have suggested. [close]
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Berman, Eli, John Bound and Stephen Machin (1998).
Implications of Skill-Biased Technological Change: International Evidence.
In: Quarterly Journal of Economics
113(4)
, 1245-1280
.
Abstract.
Link.
Demand for less skilled workers decreased dramatically in the US and in other developed countries over the past two decades. We argue that pervasive skill biased technological change rather than increased trade with the developing world is the principal culprit. The pervasiveness of this technological change is important for two reasons. First, it is an immediate and testable implication of technological change. Second, under standard assumptions, the more pervasive the skill biased technological change the greater the increase in the embodied supply of less skilled workers and the greater the depressing effect on their relative wages through world goods prices. In contrast, in the Heckscher-Ohlin model with small open economies, the skill-bias of the local technological changes do not affect wages. Thus, pervasiveness deals with a major criticism of skill-biased technological as a cause. Testing the implications of pervasive, skill biased technological change we find strong supporting evidence. First, across OECD, most industries have increased the proportion of skilled workers employed despite rising or stable relative wages. Second, increases in demand for skills were concentrated in the same manufacturing industries in different developed countries. [close]
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Hanushek, Eric, Charles Leung and Kuzey Yilmaz (2003).
Redistribution Through Education and Other Transfer Mechanisms.
In: Journal of Monetary Economics
50(8)
, 1719-1750
.
Abstract.
Link.
Educational subsidies are frequently justified as a method of altering the income distribution. It is thus natural to compare education to other tax-transfer schemes designed to achieve distributional objectives. While equity-efficiency trade-offs are frequently discussed, they are rarely explicitly treated. This paper creates a general equilibrium model of school attendance, labor supply, wage determination, and aggregate production, which is used to compare alternative redistribution devices in terms of both deadweight loss and distributional outcomes. A wage subsidy generally dominates tuition subsidies across a wide range of fundamental parameters for the economy. Both are generally superior to a negative income tax. With externalities in production, however, there is an unambiguous role for governmental subsidy of education, because it both raises GDP and creates a more equal income distribution. [close]
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Sylwester, Kevin (2002).
Can Education Expenditures Reduce Income Inequality?.
In: Economics of Education Review
21(1)
, 43-52
.
Abstract.
Link.
Using a cross section of countries, this paper empirically examines whether devoting more resources to education can positively affect the distribution of income (as measured by the Gini coefficient) within a country. From the findings, public education expenditures appear to be associated with a subsequent decrease in the level of income inequality. This finding is robust to the inclusion of various control variables and appears to be larger in high income nations. The findings suggest that devoting more resources to education may be one way to reduce the level of income inequality within a country. [close]
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Bénabou, Roland (1993).
Workings of a City: Location, Education and Production.
In: Quarterly Journal of Economics
108(3)
, 619-652
.
Abstract.
Link.
We examine the implications of local externalities in human capital investment for the size of composition of the productive labor force. The model links residential choice, skills acquisition, and production in a city composed of several communities. [close]
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Barro, Robert and Jong-Wha Lee (1996).
International Measures of Schooling Years and Schooling Quality.
In: American Economic Review
86(2)
, 218-223
.
Abstract.
Link.
This study provides an update on measures of educational attainment for a broad cross section of countries. [close]
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Benhabib, Jess and Mark Spiegel (1994).
The Role of Human Capital in Development: Evidence From Aggregate Cross-Country Data.
In: Journal of Monetary Economics
34(2)
, 143-174
.
Link.
[close]
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Grossman, Hershel and Minseong Kim (2003).
Educational Policy: Egalitarian or Elitist?.
In: Economics and Politics
15(3)
, 225-246
.
Abstract.
Link.
This paper offers an explanation for observed differences across countries in educational policies and in resulting interpersonal distributions of human capital. We analyse a general equilibrium model in which, as a result of the apportionment of natural ability, nurturing, and publicly financed education, some people can be well endowed with human capital, whereas other people are poorly endowed with human capital. We assume that people can choose to be either producers or predators. Because an increase in a person’s human capital makes predation a less attractive choice for that person, it is possible that by using some of their human capital to educate the poorly endowed people the well endowed people can increase their own consumption. More interestingly, our theory predicts that, if producers are able to enforce a collective choice that takes advantage of the deterrent e.ect of allocating resources to guarding against predators, then the well endowed people prefer a relatively egalitarian educational policy that increases the human capital of all of the poorly endowed people. Such an educational policy either decreases the cost of deterring predation or makes deterrence possible. In contrast, if producers or small subsets of producers individually choose the amount of their resources to allocate to guarding, taking the ratio of predators to producers as given, then the well endowed people prefer an elitist educational policy that, if it has a redistributional component, decreases the number of poorly endowed people, thereby decreasing the number of predators, without increasing the human capital of the remaining poorly endowed people. These implications seem to be consistent with the facts about differences across countries in educational policy. [close]
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Bénabou, Roland (2002).
Tax and Education Policy in a Heterogeneous-Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?.
In: Econometrica
70(2)
, 481-517
.
Abstract.
Link.
This paper studies the effects of progressive income taxes and education finance in a dynamic heterogeneous-agent economy. Such redistributive policies entail distortions to labor supply and savings, but also serve as partial substitutes for missing credit and insurance markets. The resulting tradeoffs for growth and efficiency are explored, both theoretically and quantitatively, in a model that yields complete analytical solutions. Progressive education finance always leads to higher income growth than taxes and transfers, but at the cost of lower insurance. Overall efficiency is assessed using a new measure that properly reflects aggregate resources and idiosyncratic risks but, unlike a standard social welfare function, does not reward equality per se, Simulations using empirical parameter estimates show that the efficiency costs and benefits of redistribution are generally of the same order of magnitude, resulting in plausible values for the optimal rates. Aggregate income and aggregate welfare provide only crude lower and upper bounds around the true efficiency tradeoff. [close]
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Gradstein, Mark and Moshe Justman (2000).
Human Capital, Social Capital, and Public Schooling.
In: European Economic Review
44(6)
, 879-890
.
Abstract.
Link.
Public education contributes to growth not only by building human capital but also by instilling common norms that increase social cohesion. This is modeled in the context of a political economy framework in which social cohesion reduces wasteful rent seeking, and thus strengthens incentives for investment in human captial. The political decisions that determine whether different social groups retain separate schooling systems, or adopt atl integrated system, weigh these material advantages against the psychic cost to parents of alienating their children from traditional values. This aspect of public education helps explain why, commonly, education is publicly administered as well as publicly financed. [close]
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Fernandez, Raquel and Richard Rogerson (2001).
Sorting and Long-Run Inequality.
In: Quaterly Journal of Economics
116(4)
, 1305-1341
.
Abstract.
Link.
Many social commentators have raised concerns over the possibility that increased sorting in society may lead to greater inequality. To investigate this, we construct a dynamic model of intergenerational education acquisition, fertility, and marital sorting and parameterize the steady state to match several basic empirical findings. We find that increased sorting will significantly increase income inequality. Four factors are important to our findings: a negative correlation between fertility and education, a decreasing marginal effect of parental education on children's years of education, wages that are sensitive to the relative supply of skilled workers, and borrowing constraints that affect educational attainment for some low-income households. [close]
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Hanushek, Eric and Dennis Kimko (2000).
Schooling, Labor Force Quality and the Growth of Nations.
In: American Economic Review
90(5)
, 1184-1208
.
Abstract.
Link.
Direct measures of labor-force quality from international mathematics and science test scores are strongly related to growth. Indirect specification tests are generally consistent with a causal link: direct spending on schools is unrelated to student performance differences; the estimated growth effects of improved labor-force quality hold when East Asian countries are excluded; and, finally, home-country quality differences of immigrants are directly related to U.S. earnings if the immigrants are educated in their own country but not in the United States. The last estimates of micro productivity effects, however, introduce uncertainty about the magnitude of the growth effects. [close]
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De Gregorio, Jose and Jong-Wha Lee (2002).
Education and Income Inequality: New Evidence from Cross-Country Data.
In: Review of Income and Wealth
48(3)
, 395-416
.
Abstract.
Link.
This paper presents empirical evidence on how education is related to income distribution in a panel data set covering a broad range of countries for the period between 1960 and 1990. The findings indicate that educational factors-higher educational attainment and more equal distribution of education-play a significant role in making income distribution more equal. The results also confirm the Kuznets inverted-U curve for the relationship between income level and income inequality. We also find that government social expenditure contributes to more equal distribution of income. However, a significant proportion of cross-country variation in income inequality remains unexplained. [close]
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de la Croix, David and Matthias Doepke (2003).
Inequality and Growth: Why Differential Fertility Matters.
In: American Economic Review
93(4)
, 1091-1113
.
Abstract.
Link.
We develop a new theoretical link between inequality and growth. In our model, fertility and education decisions are interdependent. Poor parents decide to have many children and invest little in education. A mean-preserving spread in the income distribution increases the fertility differential between the rich and the poor, which implies that more weight gets placed on families who provide little education. Consequently, an increase in inequality lowers average education and, therefore, growth. We find that this fertility-differential effect accounts for most of the empirical relationship between inequality and growth. [close]
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Del Rey, Elena (2004).
Funding schools for greater equity.
In: Regional Science and Urban Economics
34(2)
, 203-224
.
Abstract.
Link.
Countries that finance schools by means of uniform per-student allocations and allow free school choice seem to recognize the need to regulate admissions at over-subscribed schools. In this paper, we show that, without such regulations, (i) allowing free school choice leads to complete segregation unless mobility costs are high, and (ii) higher allocations per disadvantaged student enrolled can help achieve a unique and less segregated equilibrium, especially when mobility costs are low. The latter instrument can make regulation unnecessary when the aim is to avoid cream-skimming by publicly financed schools. [close]
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Blanden, Jo and Stephen Machin (2004).
Educational Inequality and the Expansion of UK Higher Education.
In: Scottish Journal of Political Economy
51(2)
, 230-249
.
Abstract.
Link.
In this paper we explore changes over time in higher education (HE) participation and attainment between people from richer and poorer family backgrounds during a time period when the UK higher education system expanded at a rapid rate. We use longitudinal data from three time periods to study temporal shifts in HE participation and attainment across parental income groups for children going to university in the 1970s, 1980s and 1990s. The key finding is a highly policy relevant one, namely that HE expansion has not been equally distributed across people from richer and poorer backgrounds. Rather, it has disproportionately benefited children from relatively rich families. Despite the fact that many more children from higher income backgrounds participated in HE before the recent expansion of the system, the expansion acted to widen participation gaps between rich and poor children. This finding is robust to different measures of education participation and inequality. It also emerges from non-parametric estimations and from a more detailed econometric model allowing for the sequential nature of education choices with potentially different income associations at different stages of the education sequence. [close]
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Keep, Ewart and Ken Mayhew (2004).
The Economic and Distributional Implications of Current Policies on Higher Education.
In: Oxford Review of Economic Policy
20(2)
, 298-314
.
Abstract.
Link.
The British government's policy towards expanding higher education is based on two beliefs—that it is necessary for an improvement of economic performance, and that it can increase access to better jobs by those from lower socio-economic backgrounds. This article examines these two beliefs. The evidence on the economic impact of and demand for more graduates is ambiguous and contradictory. Meanwhile, the rest of the vocational and education system is likely to suffer damage as a consequence of the expansion of higher education, which is important in an economy where there remain many jobs with educational requirements below degree level. It is doubtful whether higher education is an effective or efficient means of meeting such demand. Given the present social-class composition of higher-education entry, there is a danger that further expansion, unless accompanied by a fundamental redistribution of access opportunities, will lead to a decline in social mobility. At the same time, the range of labour-market opportunities for those without degrees may get worse. [close]
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Dur, Robert, Coen Teulings and Thijs van Rens (2004).
Should Higher Education Subsidies Depend on Parental Income?.
In: Oxford Review of Economic Policy
20(2)
, 284-297
.
Abstract.
Link.
In many countries, student grants, tuition fees, and subsidized loans depend on parental income. This paper examines the efficiency and distributional effects of such conditioning, and assesses whether it is optimal practice when the government wants to reduce after-tax income inequality in the most efficient manner. Increasing the mean level of education among the work-force compresses wage differentials by level of education and thereby the pre-tax income distribution. Hence, subsidizing education may be part of an optimal redistribution policy. However, education subsidies mainly benefit high-ability students, limiting their redistributive virtues. Conditioning education subsidies on parental income may enable the government to reduce inframarginal subsidies, mainly benefiting high-ability students, while preserving the marginal subsidy, and thus the favourable effect on the mean education level which leads to wage compression. [close]
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Teulings, Coen and Thijs van Rens (2008).
Education, Growth and Income Inequality.
In: Review of Economics and Statistics
90(1)
, 89-104
.
Abstract.
Link.
Estimates of the effect of education on GDP (the social return) have been hard to reconcile with micro evidence on the private return to schooling. We present a simple explanation combining two ideas: imperfect substitution and endogenous skill-biased technological progress and use cross-country panel data on inequality and GDP to test these ideas. A one-year increase in the level of education reduces the private return by 2 percentage points, consistent with Katz-Murphy's (1992) elasticity of substitution. We find no evidence for reversal of this initial effect as in Acemoglu (2002). In the short run, the social return equals the private return. [close]
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Galor, Oded and Omer Moav (2004).
From Physical to Human Capital Accumulation: Inequality and the Process of Development.
In: Review of Economic Studies
71(4)
, 1001-1026
.
Abstract.
Link.
This paper develops a growth theory that captures the replacement of physical capital accumulation by human capital accumulation as a prime engine of growth along the process of development. It argues that the positive impact of inequality on the growth process was reversed in this process. In early stages of the Industrial Revolution, when physical capital accumulation was the prime source of growth, inequality stimulated development by channelling resources towards individuals with a higher propensity to save. As human capital emerged as a growth engine, equality alleviated adverse effects of credit-constraints on human capital accumulation, stimulating the growth process. [close]
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Cardak, Buly A. (2004).
Education Choice, Endogenous Growth and Income Distribution.
In: Economica
71(281)
, 57-81
.
Abstract.
Link.
This paper studies an economy where parents can choose between public or private schools and can vote on taxes used to fund public schools. The model is calibrated to US data and studied using simulations. A bimodal income distribution emerges where public education students converge to a low-income equilibrium while private education students experience endogenous growth with higher incomes. However, public education students experience long-run growth through a spillover from private education students. Possible problems with the existence of a private alternative to pubic education, such as the emergence of a education-based class structure, are identified. [close]
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Acemoglu, Daron and Jörn-Steffen Pischke (2001).
Changes in the Wage Structure, Family Income, and Children's Education.
In: European Economic Review
45(6)
, 890-904
.
Abstract.
Link.
We exploit the changes in the distribution of family income to estimate the effect of parental resources on college education. Our strategy exploits the fact that families at the bottom of the income distribution were much poorer in the 1990s than they were in the 1970s, while the opposite is true for families in the top quartile of the distribution. Our estimates suggest large effects of family income on enrollments. For example, we find that a 10 percent increase in family income is associated with a 1.4 percent increase in the probability of attending a four-year college. [close]
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Bertocchi, Graziella and Michael Spagat (2004).
The Evolution of Modern Educational Systems - Technical vs. General Education, Distributional Conflict, and Growth.
In: Journal of Development Economics
73(2)
, 559-582
.
Abstract.
Link.
We study the evolution of an educational system founded on a hierarchical differentiation between vocational and general education, with vocational playing an inferior role in the society. The dynamics are best summarized by the ratio of the fraction of the population in vocational to that in general education, which we interpret as a measure of the degree of stratification of the society. We show that this ratio first rises and then declines with the level of development, displaying an inverted U-shape which reflects the complex interaction between economic and political forces, including aggregate income growth, wealth inequality and political participation. [close]
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Behrman, Jere R., Robert A. Pollak and Paul Taubman (1995).
From Parent to Child: Intrahousehold Allocations and Intergenerational Relations in the United States.
Chicago:
University of Chicago Press
.
Abstract.
Link.
How do parents allocate human capital among their children? To what extent do parental decisions about resource allocation determine children's eventual economic success? The analyses in From Parent to Child explore these questions by developing and testing a model in which the earnings of children with different genetic endowments respond differently to investments in human capital. Behrman, Pollak, and Taubman use this model to investigate issues such as parental bias in resource allocations based on gender or birth order; the extent of intergenerational mobility in income, earnings, and schooling in the United States; the relative importance of environmental and genetic factors in determining variations in schooling; and whether parents' distributions offset the intended effects of government programs designed to subsidize children. In allocating scarce resources, parents face a trade-off between equity and efficiency, between the competing desires to equalize the wealth of their children and to maximize the sum of their earnings. [close]
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Zimmerman, David J. (2003).
Peer Effects in Academic Outcomes: Evidence from a Natural Experiment.
In: Review of Economics and Statistics
85(1)
, 09-23
.
Abstract.
Link.
I use data from Williams College to implement a quasi-experimental empirical strategy aimed at measuring peer effects in academic outcomes. In particular, I use data on individual students' grades, their SAT scores, and the SAT scores of their roommates. I argue that first-year roommates are assigned randomly with respect to academic ability. This allows me to measure differences in grades of high-, medium-, or low-SAT students living with high-, medium-, or low-SAT roommates. With random assignment these estimates would provide compelling estimates of the effect of roommates' academic characteristics on an individual's grades. I also consider the effect of peers at somewhat more aggregated levels. In particular, I consider the effects associated with different academic environments in clusters of rooms that define distinct social units. The results suggest that peer effects are almost always linked more strongly with verbal SAT scores than with math SAT scores. Students in the middle of the SAT distribution may have somewhat worse grades if they share a room with a student who is in the bottom 15% of the verbal SAT distribution. The effects are not large, but are statistically significant in many models. [close]
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Wolter, Stefan C. and Maja Coradi Vellacott (2003).
Sibling Rivalry for Parental Resources: A Problem for Equity in Education? A Six-Country Comparison with PISA Data.
In: Swiss Journal of Sociology
29(3)
, 377-398
.
Abstract.
Link.
In this paper we analyse the sibling size and birth-order effect on educational achievement in Switzerland on the basis of PISA data. We find an overall modest size and birth-order effect. The sibling size effect, however, is a product of a substantial and significant negative size effect for families with lower socio-economic status and foreign origin and a positive sibling size effect in small, native families with a high socio-economic status compared to singlechild families with the same background. Thus, subgroups of the population seem to be confronted with binding budget constraints, although education is free. The hypothesis that parents of larger families spend on average less time with their children is also tested and shows the expected negative effect of the sibling size. We present an extended version of the sibling size model that can account for these effects and discuss the consequences these results might have for social and educational policy. [close]
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Behrman, Jere R., Andrew D. Foster, Mark R. Rosenzweig and Prem Vashishtha (1999).
Women’s Schooling, Home Teaching, and Economic Growth.
In: Journal of Political Economy
107(4)
, 682-714
.
Abstract.
Link.
The hypothesis that increases in the schooling of women enhance the human capital of the next generation and thus make a unique contribution to economic growth is assessed on the basis of data describing green revolution India. Estimates are obtained that indicate that a component of the significant and positive relationship between maternal literacy and child schooling in the Indian setting reflects the productivity effect of home teaching and that the existence of this effect, combined with the increase in returns to schooling for men, importantly underlies the expansion of female literary following the onset of the green revolution. [close]
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Sacerdote, Bruce (2002).
The Nature and Nurture of Economic Outcomes.
In: American Economic Review
92(2)
, 344-348
.
Abstract.
Link.
This paper uses data on adopted children to examine the relative importance of biology and environment in determining educational and labor market outcomes. I employ three long-term panel data sets which contain information on adopted children, their adoptive parents, and their biological parents. In at least two of the three data sets, the mechanism for assigning children to adoptive parents is fairly random and does not match children to adoptive parents based on health, race, or ability. I find that adoptive parents' education and income have a modest impact on child test scores but a large impact on college attendance, marital status, and earnings. In contrast with existing work on IQ scores, I do not find that the influence of adoptive parents declines with child age. [close]