THE EFFECTS OF FOREIGN UNIVERSITIES ON DOMESTIC HUMAN CAPITAL ACCUMULATION

This article considers the effects upon human capital in a host country when foreign universities open branches within this country. We create a model where aspiring students differ according to inherent ability and choose endogenously how much time to devote to preparing to win admittance to a university. Universities can either be domestic or foreign, and payoffs for the student differ between them. The presence of these foreign universities can potentially increase effort—and so human capital—by providing more incentive to study. However, they can also lead to brain drain as students could be more likely to emigrate upon graduation relative to those who attend a domestic university. We apply this model to China and use parameter values in simulations to assess to what extent inflow of foreign universities provide benefits to China. (JEL D82, I23, I25)     

A HUMAN CAPITAL MODEL OF THE EFFECTS OF ABILITY AND FAMILY BACKGROUND ON OPTIMAL SCHOOLING LEVELS

This paper develops a theoretical model of optimal schooling levels where ability and family background are the central explanatory variables. We derive schooling demand and supply functions based on individual wealth maximization. Using the National Longitudinal Survey of Youth 1979 data, we stratify our sample into 1-yr full-time equivalent (FTE) work experience cohorts for 1985–1989. The estimated Mincerian "overtaking" cohort (the years of work experience at which individuals' observed earnings approximately equal what they would have been based on schooling and ability alone) corresponds to 13 FTE years of experience, yielding on average a rate of return of 10.3% and an average (optimal) 11.4 yr of schooling. ( JEL J24, J31, J22)     

THE IMPACT OF PSYCHOLOGICAL AND HUMAN CAPITAL ON WAGES

Historically, economists have taken the position that psychological capital is either unobservable or immeasurable; thus, heretofore, little evidence has been available on the contribution of psychological capital to wages. Using data drawn from two different waves of the National Longitudinal Survey of Youth, we offer evidence that psychological capital has both a direct effect—via self-esteem—and an indirect effect—through locus of control—on an individual's real wage. We find a person s wage is more sensitive to changes in self-esteem than to comparable alterations in human capital. Both relative wages and human capital contribute to self-esteem.     

UNDERSTANDING THE EFFECTS OF MARRIAGE AND DIVORCE ON FINANCIAL INVESTMENTS: THE ROLE OF BACKGROUND RISK SHARING

We investigate how changes in marital status affect financial investments and how these effects vary with background risk. We use detailed register‐based panel data and difference‐in‐differences estimators to benchmark common unobserved influences on financial investments. Women increase the fraction of wealth invested in stocks after marriage and decrease it after divorce, whereas men show the opposite behavior. Households whose joint labor income risk is reduced more by marriage have a higher increase in their exposure to risky assets in marriage. Thus income risk sharing in the household is important for financial risk taking and investment responses to marital transitions. (JEL G11, J12, J16, D14)     

THE DURABILITY OF HUMAN CAPITAL: SOME NEW EVIDENCE

This paper analyzes the effect of chronological aging, experience, job search, change of job and/or employer, and formal training on the wage growth of a sample of young men. Following the human capital literature, wage growth directly corresponds to human capital and the analysis allows for the assessment of the durability or rate of depreciation of human capital if further investments are not made. The findings suggest that human capital is not very durable, contrary to some previous estimates given in the literature.     

THE EFFECTS OF MACROECONOMIC CONDITIONS AT GRADUATION ON OVEREDUCATION

This article shows that unfavorable economic conditions at graduation decrease the likelihood of a good job‐worker match over a worker's subsequent career. Mismatch is quantified in terms of overeducation by both industry and occupation. The German Socio‐Economic Panel and region‐level unemployment rates from 1994 to 2012 are used. Instrumental variables estimates account for endogenous graduation timing. A single percentage point increase in regional unemployment causes an increase in the probability of overeducation of 1.6–1.7 percentage points for university graduates. Effects for technical tertiary education and apprenticeship graduates are smaller. Labor market entry conditions affect workers for up to 9 years after graduation. (JEL J23, J22, E32, I23)     

THE EFFECTS OF JOB RELOCATION ON SPOUSAL CAREERS: EVIDENCE FROM MILITARY CHANGE OF STATION MOVES

We investigate the impact of military job relocation on spousal earnings and employment by creating a unique longitudinal database that tracks over 900,000 military spouses over the period 2001–2012, based on data from two administrative sources—military records on personnel and their dependents, and Social Security earnings records. This database allows us to estimate the effects of military change of station moves controlling for some key observable characteristics of the service‐member and household and controlling for individual spouse fixed effects. We find that military moves cause a substantial decline in spousal earnings in the year of the move, on the order of $2,100, or 14% of average spousal earnings. Moves also increase the likelihood that the spouse has no earnings for the year. We find larger earnings reductions for moves that cross state lines, and for older spouses, male spouses, and those with young children. The career costs persist over time and spouses continue to experience significantly lower earnings 2 years after the move. This persistence, combined with the typical military member experiencing a change of station move every 2 or 3 years, may substantially limit the ability of military spouses to accumulate human capital over time. (JEL H56, R23, J45, J16, J64)     

THE HEALTH EFFECTS OF MILITARY SERVICE: EVIDENCE FROM THE VIETNAM DRAFT

There is a strong cross-sectional association between military service and adverse health. However, veterans differ very significantly in their observable characteristics from nonveterans, suggesting that some of the association between military service and adverse health may be due to omitted variables bias. To address this problem, we use draft eligibility as an instrument for military service. Despite a very strong first-stage relationship between draft eligibility and military service, the two-stage least squares estimates of the difference in health between veterans and nonveterans are statistically insignificant and too imprecise to preclude the differences in health found in the cross-sectional regressions. ( JEL H56, I12, I18)     

THE ACCUMULATION OF HUMAN CAPITAL DURING MARRIAGE BY MALES

Married males have significantly higher wage rates than never-married, widowed, or divorced males, even when differences in educational attainment, experience, race, and so on are controlled for. Evidence presented in this paper suggests that most of the unexplained wage differential associated with marital status in earnings regressions results from males accumulating human capital more rapidly when they are married than when those same males are not married. The hypothesis that married males earn more than unmarried males because marriage facilitates the financing of human capital accumulation is supported by this and other evidence.     

ELASTIC CAPITAL SUPPLY AND THE EFFECTS OF FISCAL POLICY

Existing analyses of the effects of fiscal policy in general equilibrium models have typically been conducted under the assumption that the long-run supply of capital is perfectly elastic at a fixed rate of time preference. These analyses have shown that the long-run response of the capital stock to changes in fiscal policy is crucial to generating the potential for “multiplier” effects in these models. In this paper we ask, what are the implications of relaxing the assumption of perfectly elastic capital supply for the analysis of fiscal policy? We show that with less than perfectly elastic capital supply, the potential for multipliers is actually enhanced. (JEL E62, D90)     

INEQUALITY AND GROWTH IN THE UNITED STATES: WHY PHYSICAL AND HUMAN CAPITAL MATTER

We investigate the relationship between economic growth and top income inequality under the influence of human and physical capital accumulation, using an annual panel of U.S. state‐level data. Our analysis is based upon the “unified” framework offered by Galor and Moav (2004) while the empirics account for cross‐section dependence, parameter heterogeneity, and endogeneity, in nonstationary series. We conclude that changes in inequality do not influence growth, neither in the short run nor in the long run in the United States as a whole in the 1929–2013 period. Our findings are robust to the inclusion of overall income inequality measures. These findings provide support for the theoretical prediction of the unified theory of inequality and growth, according to which the growth effect of inequality becomes insignificant in the latest stages of economic development that the United States experiences during our period of investigation. Therefore, future policies aiming at moderating the concentration at the upper end of income distribution are not likely to have adverse growth consequences in developed countries such as the United States. (JEL I21, O47, C23)     

EVALUATING CHANGES IN THE DISTRIBUTION OF CAPITAL WEALTH

A small-scale general equilibrium model in which the distribution of capital wealth is a key parameter is employed to examine the potential economic consequences of greater capital wealth equality. Every performance indicator examined – aggregate income, consumption equality, social welfare in the sum-of-utilities sense, and aggregate saving –is improved by greater capital wealth equality. However, the bottom-line social welfare gain, relative to the present high-inequality situation – even from the maximum achievable level of complete equality in capital wealth distribution – would be numerically rather modest.     

THE IMPACT OF SOCIAL CAPITAL ON THE EARNINGS OF PUERTO RICAN MIGRANTS

There is a paucity of studies examining the relationship between Puerto Ricans' social capital and their earnings. I utilized data from the Latin American Migration Project (collected in 1998 and 1999) to test five hypotheses derived from social capital theory to predict the hourly earnings of Puerto Rican migrants. My study illustrates that Puerto Rican migrants' social capital is positively related with their earnings. Interestingly, the social capital effects only pertain to Puerto Rican females. Additionally, Puerto Rican migrants do not benefit from ethnic solidarity in terms of increased wages. My analyses point toward social capital's ability to provide important labor market information to Puerto Rican females, which they appear to use to acquire jobs paying higher wages.
Social capital theory has been applied to many different phenomenon including banking, education, immigration, labor markets, and nation building ( Massey et al. 1987 ; Coleman 1988 ; Uzzi 1999 ; Fernandez, Castilla, and Moore 2000 ; Putnam 2000 ). Within the labor market, social capital has been found to be related with earnings, employment, formal employment, and job tenure ( Mier and Giloth 1986 ; Donato, Durand, and Massey 1992 ; Aguilera 1999; 2003 ; Philips and Massey 1999 ; Aguilera and Massey 2003 ). Within the immigration field, social capital has been linked with the migration process, labor market outcomes, and attainment of citizenship ( Massey et al. 1987 ; Baker 2000 ; Aguilera and Massey 2003 ; Fussell 2004 ). Unfortunately, Puerto Ricans have been unstudied within this massive literature about social capital. Additionally, gender differences in returns to social capital are only just beginning to be recognized and there is little agreement as to whether males or females benefit most from social capital. I studied the relationship between social capital and labor market outcomes of Puerto Rican migrants, paying special attention to differences in gender.     

THE IMPACT OF HIGH-TECH CAPITAL ON PRODUCTIVITY: EVIDENCE FROM AUSTRALIA

This article examines the relationship between high-tech capital use and productivity. Using Australian data, some evidence is found of a positive relationship between high-tech capital use and productivity in the market sector, but there is much less evidence of excess returns. These results are robust to the use of a variety of different measures of high-tech capital. At the industry level however, the relationship is significant and positive for only some industries. This suggests that the benefits of investment in high-tech capital are not spread evenly across the economy. (JEL O3 )     

THE IMPACT OF MACROECONOMIC CONDITIONS IN CHILDHOOD ON ADULT LABOR MARKET OUTCOMES

This study examines the influence of business cycles in childhood on economic performance later in life. I relate unemployment rates between the year before one's birth and the year of one's 15th birthday to schooling, employment, and income as an adult. The analysis exploits variation in macroeconomic conditions across states over time. I address a number of identification challenges related to cohort effects, linear trends, current events, and economic persistence. The caregiving behaviors and background characteristics of parents are also studied. The average unemployment rate in childhood normally has a negative effect on human capital in adulthood. (JEL J11, J24, J31)     

MALE-FEMALE DIFFERENCES IN OCCUPATIONAL CHOICE AND THE DEMAND FOR GENERAL AND OCCUPATION-SPECIFIC HUMAN CAPITAL

A human capital model of occupational choice as demand for general and occupation-specific human capital is developed to show how women's occupational choices vary with their lifetime labor force participation patterns. The model is tested using data from the National Longitudinal Survey of Mature Women. The major empirical finding is that women who take less home time choose occupations which require more human capital, especially specific human capital. Women's occupations and wages are quite responsive to changes in their labor force participation patterns. If women worked continuously, their occupations and wages would be much closer to those of men.     

MILITARY SPENDING AND THE GROWTH‐MAXIMIZING ALLOCATION OF PUBLIC CAPITAL: A CROSS‐COUNTRY EMPIRICAL ANALYSIS

In this paper we present an endogenous growth model to analyze the growth maximizing allocation of public investment among N different types of public capital. Using this general model of public capital formation, we analyze the stability of the long‐run equilibrium and we derive the growth‐maximizing values of the shares of public investment allocated to the different types of public capital, as well as the growth‐maximizing tax rate (amount of total public investment as a share of GDP). Then we proceed with an empirical investigation of the theoretical implication of the model that both the effects of the shares of public investment and the tax rate on the long‐run growth rate are non‐linear, following an inverse U‐shaped pattern. Using data of public investment in infrastructure and military capital formation, we derive empirical estimations that confirm the theoretical implications of the model. (JEL E62, H56, O40).