Development Economics

Transcription

1 Development Economics Education and Inequality Academic Year Dr Chiara Binelli Office hours: by appointment Short outline: This course will focus on two main areas of research in Development Economics: investments in education and inequality. It is designed as an advanced course that will focus on few topics in depth and requires an active students participation. We will study the relationship between education and earnings, the importance of quality of education, the implementation and assessment of effective education policies, the theory and measure of inequality. We will take an applied economics approach to the topics covered in the course by focusing on how to bring the theory to the data and empirically estimate the relationships of interest. Grades: Research proposal (60%) Class participation (40%) Research proposal: Each student will choose one topic related to the course and provide a short critical survey of the literature, outlining the main problems and shortcomings and providing a detailed analysis of one topic for future research. Each student will present the first draft of the research proposal in the last week of the course, and will revise the draft in light of the comments received during the presentation to prepare a final draft that will have to be submitted one week after the last class. Class participation: Meaningful participation in the course constitutes an important portion of the grade (40%). To incentivize active participation, each student will be the presenter of the assigned compulsory readings (listed as starred readings in the reading list below) for at least one week (depending on the final number of students); if two students choose to present in the same week, each of them will focus on and present half of the compulsory readings. Rather than presenting a summary of the readings, the presenter will develop a short memo by integrating the week s readings (maximum 1,800 words, single-spaced) in the context of: - The main conceptual and empirical issues raised in the readings - An evaluation of the conceptual and empirical problems encountered - Possible strategies to remedy the conceptual and/or empirical flaws - Questions that the readings leave unanswered and possible avenues for future research This memo will be the basis for our discussion and is to be distributed via by the presenter to all the participants in the class, including the instructor, by 4pm on the day before

2 the class. The presenter will open the class by presenting his/her memo with a brief discussion of what he/she thinks are the most important issues for discussion (15-20 minutes). Non-presenters should carefully read and evaluate the memo before the seminar in light of their own evaluation of the reading material and be prepared to address the concerns. In addition, to incentive all students to read the required readings, for each week all nonpresenters are to write a brief memorandum (maximum 600 words, single-spaced). Again, rather than summaries, the memorandum should raise the conceptual/methodological issues most important to you and further make suggestions on which aspect of the starred reading material you would like to see addressed during the class in the form of informed questions (i.e. demonstrating having read the material). This memorandum is to be submitted via to the instructor only by 4pm on the day before the first class of each week. This will be read and evaluated in light of the required readings. Active and informed seminar participation by all is expected. Main topics: 1. Education and earnings: theory and evidence. 2. Estimating the returns to education. 3. Quality of education. 4. The effectiveness of education policies: experiments and structural models. 5. Inequality of what among whom. Reading List NOTE: starred readings denote compulsory readings. TOPIC 1: Education and earnings: theory and evidence. Investment in education: earnings functions and rates of return. 1. * Heckman J. J., Lance J. Lochner and Petra E. Todd Earnings Function, Rates of Return and Treatment Effects: The Mincer Equation and Beyond, Chapter 7 Handbook of the Economics of Education, Volume I, Eric A. Hanushek and Finis Welch Editors. Section 2 to section 8 included. 2. * Lang, Kevin and David Kropp Human Capital versus Sorting: The Effects of Compulsory Attendance Laws, Quarterly Journal of Economics, Vol 101, Issue 3, pp * Tyler, Murnane, and Willett Estimating the Labor Market Signaling Value of the GED, Quarterly Journal of Economics, Vol 115, No. 2, pp Psacharopoulos, George, "Returns to investment in education: A global update," World Development, Vol. 22(9), pp Psacharopoulos and Patrinos Returns to Investment in Education: A Further Update, Education Economics, Vol. 12, No. 2.

3 TOPIC 2: Estimating the returns to education. Regression analysis, experiments and structural models. Regression analysis: 1. Angrist, Joshua D. and Guido W., Imbens Two-Stage Least Squares Estimation of Average Causal Effects in Models With Variable Treatment Intensity, Journal of the American Statistical Association, Vol. 90, No Ashenfelter, Orley and Cecilia, Rouse Income, Schooling, and Ability: Evidence from a New Sample of Identical Twins, Quarterly Journal of Economics, Vol. 113, No. 1, pp * Angrist, Joshua D. and Alan B., Krueger Does Compulsory School Attendance Affect Schooling and Earnings?, Quarterly Journal of Economics, Vol. 106, No. 4 (Nov., 1991), pp * Card, David Using Geographic Variation in College Proximity to Estimate the Return to Schooling Aspects of Labour Economics: Essays in Honour of John Vanderkamp, edited by Louis Christofides, E. Kenneth Grant and Robert Swindinsky. University of Toronto Press. Previous version available at: 5. * Card, David The Causal Effect of Education on Earnings, Chapter 30 Handbook of Labor Economics, Volume 3, Edited by O. Ashenfelter and D. Card. 6. * Card David Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems", Econometrica, 69 (5), Experiments and structural models: 1. Blundell R Comments on: Michael P. Keane `Structural vs. atheoretic approaches to econometrics', Journal of Econometrics. 2. Deaton, A Instruments of Development: Randomization in the Tropics, and the Search for the Elusive Keys to Economic Development, NBER Working Paper No * Heckman, J., and Sergio, Urzua Comparing IV with Structural Models: What Simple IV Can and Cannot Identify, NBER Working Paper No Imbens, W. G Better LATE Than Nothing: Some Comments on Deaton (2009) Heckman and Urzua (2009), NBER Working Paper No * Rosenzweig, M., and Kenneth, I. Wolpin Natural Natural Experiments in Economics, Journal of Economic Literature, 38:4, pp NOTE: Card (1999) and Card (2001) present a very good review of the literature that uses supply-side features of education system to identify the causal effect of education on earnings. Rosenzweig and Wolpin (2000) and Heckman and Urzua (2009) are the main references on the reduced form versus structural estimation methods debate directly applied to the estimation of the returns to schooling. Deaton (2009) and Imbens (2009) present a broader discussion using different examples from the empirical literature on labour economics.

4 TOPIC 3: Quality of education. Returns to quality education. 1. Angrist, J. D. and Victor Lavy Using Maimonides Rule to Estimate the Effect of Class Size on Scholastic Achievement, Quarterly Journal of Economics, pages * Behrman, J.R., and Nancy, Birdsall The Quality of Schooling: Quantity Alone is Misleading. American Economic Review, 73: * Behrman, J.R., and Nancy, Birdsall The Quality of Schooling: Reply. American Economic Review, 75: Betts, J.R Returns to Quality of Education. Economics of Education Series 1, Economics of Education Thematic Group, The World Bank. 5. * Black, D. A., and Jeffrey, Smith Estimating the Returns to College Quality with Multiple Proxies for Quality, Journal of Labor Economics, Vol. 24, No * Card, D., and Alan B., Krueger Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States, Journal of Political Economy, Vol. 1000, No. 1, pp * Card, D., and Alan B., Krueger Labor Market Effects of School Quality: Theory and Evidence. NBER Working Paper Series Dale, S. B., and Alan B., Krueger Estimating the Payoff to Attending a More Selective College: An Application of Selection on Observables and Unobservables, Quarterly Journal of Economics, Vol. 117, No. 4, pp * Glewwe, P Schools and Skills in Developing Countries: Education Policies and Socioeconomic Outcomes, Journal of Economic Literature, Vol. XL, pp Hanushek, E., and Lei, Zhang Quality-Consistent Estimates of International Returns to Skill, NBER Working Paper No Waldinger F Quality Matters: The Expulsion of Professors and the Consequences for Ph.D. Student Outcomes in Nazi Germany, Journal of Political Economy, vol. 118, no. 4, pp , 2010 NOTE: the main references for the theory on education quality are Behrman and Birdsall (1983) and Card and Krueger (1996). Card and Krueger (1996) do also provide a good summary of the main empirical contributions. The model developed by Glewwe (2002) does also offer interesting insights. Hanushek and Zhang (2006) is a good reference for some empirical advances on estimating returns to schooling accounting for education quality.

5 TOPIC 4: The effectiveness of education policies. Evaluating the effectiveness of education policies: ex-ante and ex-post evaluations, short and long-term effects. 1. Attanasio O., Costas Meghir, and Miguel Székely Using randomized experiments and structural models for 'scaling up': evidence from the PROGRESA evaluation, IFS Working Papers, EWP04/ * Attanasio O., Costas Meghir and Ana Santiago Education choices in Mexico: using a structural model and a randomised experiment to evaluate Progresa", Review of Economic Studies. 3. Behrman J. R., Sengupta P, Todd, PE Progressing through PROGRESA: An Impact Assessment of a School Subsidy Experiment in Rural Mexico, Economic Development & Cultural Change, 54 (Issue 1): * Duflo E., Rachel Glennerster and Michael Kremer Using Randomization in Development Economics Research: A Toolkit, Handbook of Development Economics, Volume 4, Pages * Meghir C Dynamic Models for Policy Evaluation, IFS working paper WP06/ Schultz TP School subsidies for the poor: evaluating the Mexican Progresa poverty program, Journal of Development Economics, 74 (Issue 1): * Todd P.E., Kenneth I. Wolpin Assessing the Impact of a School Subsidy Program in Mexico: Using a Social Experiment to Validate a Dynamic Behavioural Model of Child Schooling and Fertility, American Economic Review. 96 (Issue 5): * Todd P.E., Kenneth I. Wolpin Structural Estimation and Policy Evaluation in Developing Countries" forthcoming in Volume 2, Annual Review of Economics. 9. * Todd P.E., Kenneth I. Wolpin "Ex Ante Evaluation of Social Programs" forthcoming in Annals of Economics and Statistics. NOTE: Todd and Wolpin (2009) and Duflo, Glennerster and Kremer (2007) are, respectively, the main reference for structural model estimation and for randomization as a tool for policy evaluation in developing countries. Todd and Wolpin (2008) for ex-ante evaluations. Meghir (2006) for a discussion of how to assess long-run general equilibrium effects of a policy intervention. Attanasio, Meghir and Santiago (2011) and Todd and Wolpin (2006) for an example of an ex-post policy evaluation as well as a framework for ex-ante evaluations. TOPIC 5: Inequality of what among whom. Understanding and measuring inequality. 1. * Almås, Ingvild, Alexander W. Cappelen, Jo Thori Lind, Erik Ø. Sørensen, and Bertil Tungodden "Measuring unfair (in)equality," Journal of Public Economics, Vol. 95(7), pages

6 2. * Atkinson, Anthony B. and Francois J. Bourguignon Handbook of Income Distribution. North-Holland. Chapter 1 and Bartles, Larry Unequal Democracy: The Political Economy of the New Gilded Age. Princeton University Press. 4. * Binelli, Chiara, Matthew Loveless, and Stephen Whitefield What is Social Inequality and Why Does it Matter? Evidence from Central and Eastern Europe. World Development, Vol. 70, pp Checci, Daniele and Vito Peragine Inequality of opportunity in Italy, Journal of Economic Inequality, Vol. 8(4), pages * Cowell Frank A Measuring Inequality. LSE Perspective in Economic Analysis. Oxford University Press. Chapter 2 and Credit Suisse Research Institute Global Wealth Report. 8. Organization for Economic Cooperation and Development Divided We Stand: Why Inequality Keeps Rising * Sen, Amartya K Inequality Reexamined. Oxford: Oxford University Press. Chapter 1, 2, and 3. You can access the full book online at: United Nations Development Programme. Human Development Report NOTE: chapter 2 in Atkinson and Bourguignon (2000), and chapter 2 and 3 in Cowell (2011) are the main references for a detailed discussion on the measurement of inequality. Chapter 1 by Amartya Sen on Social Justice and the Distribution of Income in Atkinson and Bourguignon (2000) is a complementary reading to Sen (1992).