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Author: Belzil, Christian
Resulting in 8 citations.
1. Belzil, Christian
Hansen, Jörgen
A Structural Analysis of the Correlated Random Coefficient Wage Regression Model
IZA Discussion Paper No. 512, Institute for the Study of Labor (IZA), June 2002.
Also: ftp://ftp.iza.org/dps/dp512.pdf
Cohort(s): NLSY79
Publisher: Institute for the Study of Labor (IZA)
Keyword(s): Educational Attainment; Educational Returns; Modeling; Schooling

Permission to reprint the abstract has not been received from the publisher.

We estimate a finite mixture dynamic programming model of schooling decisions in which the log wage regression function is set in a random coefficient framework. The model allows for absolute and comparative advantages in the labor market and assumes that the population is composed of 8 unknown types. Overall, labor market skills (as opposed to taste for schooling) appear to be the prime factor explaining schooling attainments. The estimates indicate a higher cross-sectional variance in the returns to experience than in the returns to schooling. From various simulations, we find that the sub-population mostly affected by a counterfactual change in the utility of attending school is composed of individuals who have any combination of some of the following attributes: absolute advantages in the labor market, high returns to experience, low utility of attending school and relatively low returns to schooling. Unlike what is often postulated in the average treatment effect literature, the weak correlation (unconditional) between the returns to schooling and the individual reactions to treatment is not sufficient to reconcile the discrepancy between OLS and IV estimates of the returns to schooling often found in the literature.
Bibliography Citation
Belzil, Christian and Jörgen Hansen. "A Structural Analysis of the Correlated Random Coefficient Wage Regression Model." IZA Discussion Paper No. 512, Institute for the Study of Labor (IZA), June 2002.
2. Belzil, Christian
Hansen, Jörgen
A Structural Analysis of the Correlated Random Coefficient Wage Regression Model with an Application to the OLS-IV Puzzle
IZA Discussion Paper No. 1585, Institute for the Study of Labor (IZA), May 2005.
Also: ftp://ftp.iza.org/dps/dp1585.pdf
Cohort(s): NLSY79
Publisher: Institute for the Study of Labor (IZA)
Keyword(s): Educational Returns; Heterogeneity; Modeling; School Entry/Readiness

Permission to reprint the abstract has not been received from the publisher.

We estimate a finite mixture dynamic programming model of schooling decisions in which the log wage regression function is set within a correlated random coefficient model and we use the structural estimates to perform counterfactual experiments. We show that the estimates of the dynamic programming model with a rich heterogeneity specification, along with simulated schooling/wage histories, may be used to obtain estimates of the average treatment effects (ATE), the average treatment effects for the treated and the untreated (ATT/ATU), the marginal treatment effect (MTE) and, finally, the local average treatment effects (LATE). The model is implemented on a panel of white males taken from the National Longitudinal Survey of Youth (NLSY) from 1979 until 1994. We find that the average return to experience upon entering the labor market (0.059) exceeds the average return to schooling in the population (0.043). The importance of selectivity based on individual specific returns to schooling is illustrated by the difference between the average returns for those who have not attended college (0.0321) and those who attended college (0.0645). Our estimate of the MTE (0.0573) lies between the ATU and ATT and exceeds the average return in the population. Interestingly, the low average wage return is compatible with the occurrence of very high returns to schooling in some subpopulation (the highest type specific return is 0.13) and the simulated IV estimates (around 0.10) are comparable to those very high estimates often reported in the literature. The high estimates are explained by the positive correlation between the returns to schooling and the individual specific reactions. Moreover, they are not solely attributable to those individuals who are at the margin, but also to those individuals who would achieve a higher grade level no matter what. The structural dynamic programming model with multi-dimensional heterogeneity is therefore capable of explaining the well known OLS/IV puzzle.
Bibliography Citation
Belzil, Christian and Jörgen Hansen. "A Structural Analysis of the Correlated Random Coefficient Wage Regression Model with an Application to the OLS-IV Puzzle." IZA Discussion Paper No. 1585, Institute for the Study of Labor (IZA), May 2005.
3. Belzil, Christian
Hansen, Jörgen
Earnings Dispersion, Risk Aversion and Education
IZA Discussion Paper No. 513, Institute for the Study of Labor (IZA), June 2002.
Also: ftp://ftp.iza.org/dps/dp513.pdf
Cohort(s): NLSY79
Publisher: Institute for the Study of Labor (IZA)
Keyword(s): Educational Attainment; Educational Returns; Endogeneity; Heterogeneity; Modeling; Schooling; Wage Rates

Permission to reprint the abstract has not been received from the publisher.

We estimate a dynamic programming model of schooling decisions in which the degree of risk aversion can be inferred from schooling decisions. In our model, individuals are heterogeneous with respect to school and market abilities but homogeneous with respect to the degree of risk aversion. We allow endogenous schooling attainments to affect the level of risk experienced in labor market earnings through wage dispersion and employment rate dispersion. We find a low degree of relative risk aversion (0.9282) and the estimates indicate that both wage and employment rate dispersions decrease significantly with schooling attainments. We find that a counterfactual increase in risk aversion will increase schooling attainments. Finally, the low degree of risk aversion implies that an increase in earnings dispersion would have little effect on schooling attainments.
Bibliography Citation
Belzil, Christian and Jörgen Hansen. "Earnings Dispersion, Risk Aversion and Education." IZA Discussion Paper No. 513, Institute for the Study of Labor (IZA), June 2002.
4. Belzil, Christian
Hansen, Jörgen
Household Characteristics, Ability and Education: Evidence from a Dynamic Expected Utility Model
IZA Working Paper No. 43, Institute for the Study of Labor (IZA), May 1999.
Also: ftp://repec.iza.org/RePEc/Discussionpaper/dp43.pdf
Cohort(s): NLSY79
Publisher: Institute for the Study of Labor (IZA)
Keyword(s): Armed Forces Qualifications Test (AFQT); Educational Attainment; Educational Returns; Intergenerational Patterns/Transmission; Modeling; Schooling

Permission to reprint the abstract has not been received from the publisher.

We estimate a Dynamic Programming model of the decision between continuing schooling or entering the labor market using a panel from the National Longitudinal Survey (NLSY). The model, set in an expected utility framework (with a power utility function), fits data on both schooling attainments and wage very well. We find a degree of relative risk aversion much smaller than usually found in the finance literature (around 0.6) and a subjective annual discount rate between 4% and 5%. Various simulations indicate that schooling attainments are elastic with respect to the return to college education and, to a lesser extent, with respect to measured ability (Armed Forces Qualification Test scores) but inelastic with respect to household characteristics (especially household income). The "true" intergenerational correlation between schooling attainments and parents' education (after conditioning on observed and unobserved ability) is found to be quite low. Finally, our estimates of the return to schooling indicate strong returns to high school graduation and a clear evidence of a positive correlation between the utility of attending school and unobserved labor market ability (ability bias). Estimates of the return to schooling which take into account the ability bias are found to be between 25% and 30% smaller than those obtained ignoring it.
Bibliography Citation
Belzil, Christian and Jörgen Hansen. "Household Characteristics, Ability and Education: Evidence from a Dynamic Expected Utility Model." IZA Working Paper No. 43, Institute for the Study of Labor (IZA), May 1999.
5. Belzil, Christian
Hansen, Jörgen
Intergenerational Transfers and the Rate of Time Preference in a Dynamic Model of Schooling Decisions
Presented: New Haven, CT, Yale University, Cowles Conference on the Econometrics of Strategy and Decision Making, May 2000
Cohort(s): NLSY79
Publisher: Cowles Foundation for Research and Economics, Yale University
Keyword(s): Armed Forces Qualifications Test (AFQT); Educational Attainment; Educational Returns; Intergenerational Patterns/Transmission; Schooling; Time Preference; Transfers, Family

Permission to reprint the abstract has not been received from the publisher.

The main objective of the present paper is to estimate a structural model of schooling decisions in which the separate effects of subjective discount rates, labor market ability and intergenerational transfers on schooling attainments can be identified and which can be used to evaluate the relative importance of discount rate heterogeneity and family background variables. The model, which is estimated in the present paper, is similar to the one discussed in Belzil and Hansen (2000 - Subective Discount Rate, Intergenerational Transfers and the Return of Schooling).
Bibliography Citation
Belzil, Christian and Jörgen Hansen. "Intergenerational Transfers and the Rate of Time Preference in a Dynamic Model of Schooling Decisions." Presented: New Haven, CT, Yale University, Cowles Conference on the Econometrics of Strategy and Decision Making, May 2000.
6. Belzil, Christian
Hansen, Jörgen
Subjective Discount Rates, Intergenerational Transfers and the Return to Schooling
IZA Discussion Paper No. 60, Institute for the Study of Labor (IZA), October 1999.
Also: ftp://repec.iza.org/RePEc/Discussionpaper/dp60.pdf
Cohort(s): NLSY79
Publisher: Institute for the Study of Labor (IZA)
Keyword(s): Armed Forces Qualifications Test (AFQT); Educational Attainment; Educational Returns; Human Capital; Intergenerational Patterns/Transmission; Modeling; Schooling; Transfers, Family

Permission to reprint the abstract has not been received from the publisher.

Using a dynamic programming model of schooling decisions, we investigate the relationship between subjective discount rates and the labor market ability (the discount rate bias) on a panel taken from the National Longitudinal Survey of Youth (NLSY). Given household human capital and Armed Forces Qualification test scores (AFQT), subjective discount rates, which vary between 1% and 5% per year, are found to be negatively correlated with labor market ability. The true return to schooling is estimated around 6% per year. Estimates obtained from a model where neither the ability bias nor the discount rate bias are considered indicate that one percentage point can be imputed to the correlation between the per-period utility of attending school and labor market ability. The model is used to simulate the effects of an increase in the level of human capital of one generation on both schooling attainments and labor market productivity of the next generation. We find the true intergenerational education correlation to be relatively low; an increase of 1 year in the average level of schooling will raise the level of human capital of the next generation by approximately 0.15 year of schooling and translates into a 1% productivity (wage) growth.
Bibliography Citation
Belzil, Christian and Jörgen Hansen. "Subjective Discount Rates, Intergenerational Transfers and the Return to Schooling." IZA Discussion Paper No. 60, Institute for the Study of Labor (IZA), October 1999.
7. Belzil, Christian
Hansen, Jörgen
Unobserved Ability and the Return to Schooling
Econometrica 70,5 (2002): 2078-2091.
Also: http://www.jstor.org/stable/3082032
Cohort(s): NLSY79
Publisher: Blackwell Publishing, Inc. => Wiley Online
Keyword(s): Educational Attainment; Educational Returns; Modeling; Schooling

We estimate a structural dynamic programming model of schooling decisions with unobserved heterogeneity in school ability and market ability on a sample taken from the National Longitudinal Survey of Youth (NLSY). Both the instantaneous utility of attending school and the wage regression function are estimated flexibly. The null hypothesis that the local returns to schooling are constant is strongly rejected in favor of a convex wage regression function composed of 8 spline segments. The local returns are very low until grade 11 (1% per year or less), increase to 3.7% in grade 12 and exceed 10% only from grade 14 to grade 16. The average return increases smoothly from 0.4% (grade 7) to 4.6% (grade 16). The convexity of the log wage regression function implies that those who obtain more schooling also experience higher average returns. We strongly reject the null hypothesis that unobserved market ability is uncorrelated with realized schooling attainments, which underlies many previous studies that have used OLS to estimate the return to schooling. The correlation between realized schooling and market ability is found to be positive and is consistent with the existence of a positive 'Ability Bias'.
Bibliography Citation
Belzil, Christian and Jörgen Hansen. "Unobserved Ability and the Return to Schooling." Econometrica 70,5 (2002): 2078-2091.
8. Belzil, Christian
Hansen, Jörgen
Unobserved Ability and the Return to Schooling
IZA Discussion Paper No. 508, Institute for the Study of Labor (IZA), May 2002.
Also: ftp://ftp.iza.org/dps/dp508.pdf
Cohort(s): NLSY79
Publisher: Institute for the Study of Labor (IZA)
Keyword(s): Educational Attainment; Educational Returns; Labor Market Outcomes; Modeling; Schooling; Schooling, Post-secondary; Wage Equations; Wage Models

Permission to reprint the abstract has not been received from the publisher.

We estimate a structural dynamic programming model of schooling decisions with unobserved heterogeneity in school ability and market ability on a sample taken from the National Longitudinal Survey of Youth (NLSY). Both the instantaneous utility of attending school and the wage regression function are estimated flexibly. The null hypothesis that the local returns to schooling are constant is strongly rejected in favor of a convex wage regression function composed of 8 spline segments. The local returns are very low until grade 11 (1% per year or less), increase to 3.7% in grade 12 and exceed 10% only from grade 14 to grade 16. The average return increases smoothly from 0.4% (grade 7) to 4.6% (grade 16). The convexity of the log wage regression function implies that those who obtain more schooling also experience higher average returns. We strongly reject the null hypothesis that unobserved market ability is uncorrelated with realized schooling attainments, which underlies many previous studies that have used OLS to estimate the return to schooling. The correlation between realized schooling and market ability is found to be positive and is consistent with the existence of a positive “Ability Bias”.
Bibliography Citation
Belzil, Christian and Jörgen Hansen. "Unobserved Ability and the Return to Schooling." IZA Discussion Paper No. 508, Institute for the Study of Labor (IZA), May 2002.