This paper estimates the effects of school quality -- measured by the
pupil-teacher ratio, the average term length, and the relative pay of
teachers -- on the rate of return to education for men born between 1920 and
1949. Using earnings data from the 1980 Census, we find that men who were
educated in states with higher quality schools have a higher return to
additional years of schooling, holding constant their current state of
residence, their state of birth, the average return to education in the
region where they currently reside, and other factors. A decrease in the
pupil-teacher ratio from 30 to 25, for example, is associated with a 0.4
percentage point increase in the rate of return to education. The estimated
relationship between the return to education and measures of school quality
is similar for blacks and whites. Since improvements in school quality for
black students were mainly driven by political and judicial pressures, we
argue that the evidence for blacks reinforces a causal interpretation of the
link between school quality and earnings. We also find that returns to
schooling are higher for students educated in states with a higher fraction
of female teachers, and in states with higher average teacher education.
Holding constant school quality measures, however, we find no evidence that
parental income or education affects state-level rates of return.
This paper estimates the effects of school quality -- measured by the
This paper considers the importance of minimum hours thresholds
for the interpretation of individual labor supply data. An analysis
of quarterly labor supply outcomes for prime-age males in the Survey
of Income and Program Participation suggests that such thresholds are
an important aspect of weekly hours choices. A simple contracting
model is presented that incorporates mobility costs and a non-
convexity in the relation between weekly hours and effective labor
input. This non-convexity gives rise to a two-part employment
schedule. In periods of low demand, some individuals are temporarily
laid off, while others work a minimum threshold level of hours. In
periods of higher demand all available workers are employed at hours
in excess of the threshold level. The model provides a simple
interpretation for the role of demand-side variables in explaining
annual labor supply outcomes. It can also explain the weak
correlations between annual hours and average hourly earnings that
have emerged in earlier studies. Under suitable assumptions on
preferences the intertemporal labor supply elasticity can be
recovered from the relationship between earnings and hours per week.
Estimation results for the SIPP panel yield elasticity estimates that
are similar to those in the literature based on annual data. If the
model is correct, however, annual labor supply is considerably more
sensitive to changes in productivity than these estimates suggest.
More than one million new immigrants currently enter the United States every year. In this paper
I use 1990 Census data to study the effects of immigrant inﬂows on the local labor market
opportunities of natives and older immigrants. I depart from the previous literature by classifying
new immigrants, older immigrants, and natives into distinct skill groups, and focussing on skill-
group-speciﬁc outcomes within cities. Recent immigrants tend to be disproportionately concentrated
in the lowest skill groups, although the makeup of immigrant inﬂows to individual cities varies with
the source countries of the immigrants. An important first question is whether the arrival of new
immigrants generates offsetting mobility by natives or earlier immigrants. Using micro-level mobility
ﬂows from 1985 to 1990 I find that natives‘ locational decisions are virtually unaffected by inﬂows
of new immigrants. Earlier immigrants are less likely to move to cities that are drawing new
immigrants in their specific skill groups, but on net each new immigrant expands the local population
of his or her particular skill group by 1. I find that immigration-induced rises in the relative fraction
of the population in speciﬁc skill groups generate small reductions in the employment rates of
natives and earlier immigrants in the same skill group. The estimated effects on relative wages are
smaller still, and not as robust to alternative speciﬁcations. Consistent with earlier studies, I
conclude that even large inﬂows of relatively unskilled new immigrants generate surprisingly small
effects on the relative labor market performance of less-skilled natives or earlier immigrants.
This paper uses a variety of data sources to track the earnings
of airline industry employees over the past two decades and assess
the changes that have occurred since deregulation in 1978.
Individual microdata from Census files as well as collective
bargaining contract information are used to follow wages for
pilots, flight attendants, mechanics, and workers as a whole.
Perhaps surprisingly, I find that the real earnings of airline
workers have declined only modestly in the past 10 years.
Comparisons with other groups of workers suggest that these
declines have been about the same or only slightly larger than
those observed for most other workers in the economy. Furthermore,
within the airline industry, the declines in earnings have been
similar for all three groups of skilled workers. If the
deregulated industry can be taken as a competitive benchmark, these
findings suggest that the regulatory rents earned by airline
workers prior to deregulation were relatively small. This view
fails to explain the wide inter-firm variation in earnings that has
emerged in the post-deregulation period, however. An alternative
interpretation is that rents continue to exist at many airline
firms, and that these rents continue to be shared by employees at
the successful airlines.
The imposition of a national wage standard sets up a useful natural
experiment in which the "treatment effect" varies across states depending
on the fraction of workers earning less than the new minimum. I use this
idea to evaluate the effect of the April 1990 increase in the Federal
minimum wage on teenage wages, employment, and school enrollment.
Interstate variation in teenage wages was high at the end of the 1980s, in
part because 16 states had enacted state-specific minimums above the
prevailing Federal rate. Comparisons of grouped and individual state data
confirm that the rise in the minimum wage significantly increased teenage
wages. There is no evidence of corresponding losses in teenage employment
or changes in teenage school enrollment.
In this paper we set out some methods that utilize the longitudinal
structure of earnings of trainees and a comparison group to estimate the
effectiveness of training for the 1976 cohort of CETA trainees. By
fitting a components-of—variance model of earnings to the control group,
and by posing a simple model of program participation, we are able to
predict the entire pre-training and post—training earnings histories
of the trainees. The fit of these predictions to the pre-training
earnings of the CETA participants provides a test of the model of
earnings generation and program participation and a simple check on
the corresponding estimate of the effectiveness of training.
Two assumptions have a strong influence on the magnitude of the
estimated training effects: the timing of the decision to participate
in training, and the presence or absence of individual-specific trends
in earnings. We find considerable evidence that trainee earnings con—
tain permanent, transitory,and trend—like components of selection bias.
We are less successful
in empirically distinguishing between alternative
assumptions on the timing of the participation decision. If earnings
in the year prior to training are the appropriate selection criterion,
then our estimate of the training effect for adult male CETA partici-
pants is about 300 dollars per year. Our estimates for female CETA
participants are larger and less sensitive to alternative models of
This paper presents new evidence on the reasons for the recent decline in
the fraction of unemployed workers who receive unemployment insurance benefits.
Using samples of unemployed workers from the March Current Population Survey,
we estimate the fraction of unemployed workers who are potentially eligible for
benefits in each year and compare this to the fraction who actually receive
unemployment compensation. Perhaps surprisingly, we find that the decline in
the fraction of insured unemployment is due to a decline in the takeup rate for
benefits. Our estimates indicate that takeup rates declined abruptly between
l98O and 1982, leading to a 6 percentage point decline in the fraction of the
unemployed who receive benefits.
We go on to analyse the determinants of the takeup rate for unemployment
benefits, using both aggregated state-level data and micro-data from the Panel
Study of Income Dynamics. Changes in the regional distribution of unemployment
account for roughly one-half of the decline in average takeup rates. The
remainder of the change is largely unexplained.
This paper presents a survey and interpretation of recent research on
the return to education. The empirical findings in a series of current
papers suggest that the causal effect of education on earnings is
understated by standard estimation methods. Using a simple model of
optimal schooling developed by Gary Becker (1967), I derive an explicit
formula for the conventional estimate of the return to schooling and for
alternative instrumental variables and fixed-effects estimators. The
analysis suggests that instrumental variables estimates based on
"interventions" that affect the schooling choices of children from
relatively disadvantaged family backgrounds will tend to exceed the
corresponding OLS estimates.
We re-examine the evidence presented by Neumark and Wascher (1992) on
the employment effect of the minimum wage. We find three critical flaws in
their analysis. First, the school enrollment variable that plays a pivotal
role in their specifications is derived on the false assumption that
teenagers either work or attend school. Measurement error biases
contaminate all the empirical estimates that use this enrollment variable.
Second, Neumark and Wascher measure the effect of the minimum wage by a
coverage-weighted relative minimum wage index. This variable is negatively
correlated with average teenage wages. Taken literally, their results show
that a rise in the coverage-weighted relative minimum wage lowers teenage
wages. Examining the direct effects of state-specific minimum wages, we
find that increases in state minimum wages raise average teenage wages but
have essentially no employment effects.
Finally, a careful analysis of Neumark and Wascher's data shows that
subminimum wage provisions are rarely used. This casts doubt on their
claim that subminimum provisions blunt any disemployment effect of the
Neumark and Wascher contend that other minimum wage studies are biased
by failing to control for school enrollment, and by failing to consider the
lagged effects of minimum wages. We re-analyze the experiences of
individual states following the April 1990 increase in the Federal minimum
wage, allowing for a full year lag in the effect of the law and controlling
for changes in (properly measured) enrollment rates. Contrary to their
claims, allowing for lagged effects and controlling for enrollment status
actually strengthens the conclusion that the 1990 increase in the Federal
minimum had no adverse employment effect.