Human capital, social mobility and the skill premium

This paper develops a dynamic general equilibrium model to highlight the role of human capital accumulation of agents differentiated by skill type in the joint determination of social mobility and the skill premium. We first show that our model captures the empirical co-movement of the skill premium, the relative supply of skilled to unskilled workers and aggregate output in the U.S. data from 1970-2000. We next show that endogenous social mobility and human capital accumulation are key channels through which the effects of capital tax cuts and increases in public spending on both pre- and post-college education are transmitted. In particular, social mobility creates additional incentives for the agents which enhance the beneficial effects of policy reforms. Moreover, the dynamics of human capital accumulation imply that, post reform, the skill premium is higher in the short- to medium-run than in the long-run.

Understanding Interactions in Social Networks and Committees

While much of the literature on cross section dependence has focused mainly on estimation of the regression coefficients in the underlying model, estimation and inferences on the magnitude and strength of spill-overs and interactions has been largely ignored. At the same time, such inferences are important in many applications, not least because they have structural interpretations and provide useful interpretation and structural explanation for the strength of any interactions. In this paper we propose GMM methods designed to uncover underlying (hidden) interactions in social networks and committees. Special attention is paid to the interval censored regression model. Our methods are applied to a study of committee decision making within the Bank of England’s monetary policy committee.

A Foundation System and a State System - Private-School Implications on Welfare and Education Expenditure

This paper examines the effects of two different education - financing systems: a foundation system and a state system on the level and distribution of resources devoted to education in the presence of private schools. We use political economy approach where households differ in their level of income, and the central tax rate used to nance education is determined by a majority vote. Our analysis focuses on implications of allowing for a private-school option. To evaluate the importance of private schools we develop a computational model and calibrate it using USA data. The results reveal that the private school option is very important quantitatively in terms of welfare, total resources spent on education and equity.

The names in Spain are mainly not in vain: Intergenerational mobility and the informational content of surnames

The paper presents a (genetic) model of the joint distribution of surnames and income. It shows that we can infer how important background is by looking at how informative surnames are. Extensions of the model allow for the possibility of assortative mating, and the introduction of ethnic differences in the income process (due to discrimination or any other reason).

Two Studies on the Interplay between Social Preferences and Individual Biological Features

Biological features and social preferences have been studied separately as factors influencing human strategic behaviour. We run two studies in order to explore the interplay between these two sets of factors. In the first study, we investigate to what extent social preferences may have some biological underpinnings. We use simple one-shot distribution experiments to attribute subjects one out of four types of social preferences: Self-interested (SI), Competitive (C), Inequality averse (IA) and Efficiency-seeking (ES). We then investigate whether these four groups display differences in their levels of facial Fluctuating Asymmetry (FA) and in proxies for exposure to testosterone during phoetal development and puberty. We observe that development-related biological features and social preferences are relatively independent. In the second study, we compare the relative weight of these two set of factors by studying how they affect subjects’ behaviour in the Ultimatum Game (UG). We find differences in offers made and rejection rates across the four social preference groups. The effect of social preferences is stronger than the effect of biological features even though the latter is significant. We also report a novel link between facial masculinity (a proxy for exposure to testosterone during puberty) and rejection rates in the UG. Our results suggest that biological features influence behaviour both directly and through their relation with the type of social preferences that individuals hold.

Intergenerational Mobility and the Informative Content of Surnames

We propose a new methodology for measuring intergenerational mobility in economic wellbeing. Our method is based on the joint distribution of surnames and economic outcomes. It circumvents the need for intergenerational panel data, a long-standing stumbling block for understanding mobility. A single cross-sectional dataset is su cient. Our main idea is simple. If `inheritance' is important for economic outcomes, then rare surnames should predict economic outcomes in the cross-section. This is because rare surnames are indicative of familial linkages. Of course, if the number of rare surnames is small, this won't work. But rare surnames are abundant in the highly-skewed nature of surname distributions from most Western societies. We develop a model that articulates this idea and shows that the more important is inheritance, the more informative will be surnames. This result is robust to a variety of di erent assumptions about fertility and mating. We apply our method using the 2001 census from Catalonia, a large region of Spain. We use educational attainment as a proxy for overall economic well-being. Our main nding is that mobility has decreased among the di erent generations of the 20th century. A complementary analysis based on sibling correlations con rms our results and provides a robustness check on our method. Our model and our data allow us to examine one possible explanation for the observed decrease in mobility. We nd that the degree of assortative mating has increased over time. Overall, we argue that our method has promise because it can tap the vast mines of census data that are available in a heretofore unexploited manner.