Lutz Hendricks - UNC - Department of
Finding a Topic: Examples
Immigrant wage gains
“Human Capital and Development Accounting: New Evidence From Immigrant Earnings”, with Todd Schoellman
Question: How important is human capital for cross-country income differences?
Measure human capital using years of schooling.
- a year of schooling in Ghana is not the same as a year of schooling in the U.S.
- human capital is more than schooling
Model how human capital is produced.
- inputs and outputs of human capital production not observed
- results differ widely across studies
Problems: immigrants are selected.
- Build on the immigrant earnings idea: observe workers from the same country at home and in the U.S.
- Address the selection problem by observing the same person in both countries (wage gains at migration).
Data: New Immigrant Survey
Returns to Experience
“Accounting for Changing Returns to Experience”
Question: Age-wage profiles have changed over time (changing returns to experience). Why?
- Large descriptive literature does not directly address causality.
- Various theoretical mechanisms:
- Changing occupational mobility
- Human capital accumulation on the job + rising college entry
- Changing return to skill versus raw labor
- Think of wage = efficiency * skill price
- The literature tries to construct models where age efficiency profiles change over time and skill prices are more or less constant over time.
- But we have reasons to believe that skill prices change substantially over time (separate literature).
- What if we try this the other way around: hold age efficiency profiles constant and let skill prices vary over time?
A very parsimonious model (that’s the whole point) where
- skill prices are a function of relative labor supplies (Katz & Murphy)
- age efficiency profiles are simply exogenous and constant over time
- cohort effects (intercepts of age profiles) depend on cohort schooling
Return to College
“The Return to College: Selection and Dropout Risk,” with Oksana Leukhina
- College graduates earn about 60% more than high school graduates.
- How much of that premium is selection? How much is return to college?
Main challenge: selection
- College graduates are “smarter” / higher ability than high school graduates.
- Need to remove that selection effect from return to college.
Literature: Too massive to summarize
Mincer returns: regress log wages on schooling and controls
Problems: selection confounds results.
- Hard to find instruments.
- Each instrument hits a different treatment group.
- IV returns to college are lower than OLS returns – hard to interpret.
Structural models of school choice
- Identification is hard without a good measure of ability.
- What happens in college is typically a black box.
Idea: College transcripts
- Transcripts offer information about student abilities.
- Can observe how students progress through college. Can model incentives to persist or drop out.
Approach: Structural model that models in detail how students progress through college.
- Each project has a clearly defined, specific question.
- In most cases, the question is not new.
- The motivation for each project: a shortcoming in the existing literature. But you need to be constructive and have an idea how to do better.
- New data (New Immigrant Survey, college transcripts).
- New observations from known data
- Example: Returns to experience are higher in richer countries (Lagakos et al., 2017, JPE).
- Better identification (college transcripts help to measure student abilities).
- A new mechanism to explain a known observation
- But need supporting evidence for the mechanism.
- Example: Test scores of college students rise over time relative to high school graduates. Suggests that selection accounts for rising college premium (Hendricks & Schoellman, 2014 JME).
- A new question (rare)