The Impact of Wage Premiums on Educational Attainment and Social Mobility

This paper investigates the role that wage premiums play for educational attainment and intergenerational social mobility. An important difference between countries with low and high levels of social mobility is the extent of upward mobility of children from low income families. This is mainly explained by the probability of high school dropout. I develop a model with three levels of education in which children facing a credit constraint choose which level of education to attain based on a transfer that they receive from their parents. I find in an empirical exercise that in the U. S. the opportunity cost of education is more important in explaining the high school dropout rate of men than the return on education. The model and the empirical results imply that a policy that reduces the opportunity cost of education and is paid by higher taxation on graduates, reducing the return on education, could decrease dropout rates, and also increase the number of graduates not facing a binding credit constraint. Such a policy could also be effective in increasing the college graduation rate of poor students and in decreasing levels of student debt.

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Explaining Trends in Fertility and Childlessness in Germany

In this paper, I analyse the decline in fertility in Germany. Decomposing the decline in completed fertility in Germany of the cohorts of women born between 1930 and 1965, I observe two distinct stages: In the first stage the decline in fertility is due to a decrease in intensive fertility (number of children per women with at least one child), whereas in the second stage the decline is due to a decrease in extensive fertility (increase in childlessness). Based on an event study approach, I argue that there are high opportunity cost of having children for women in terms of working time (and hence forgone income) independent of their education level. Based on these findings, I develop an overlapping generations model with childlessness and quantity/quality trade-off driven by the time cost of children. In a calibration exercise, this model is able to generate the decline in intensive fertility as well as the increase in childlessness that I observe in the data with an decrease in the gender wage gap.

Working Paper following soon.


Determining Education Quality in a Greying Society

With Gianko Michailidis

The increase in income inequality and the population ageing are two of the major trends in developed countries. In this paper, we analyse the effect of these trends on the level of public education and pensions spending. For this, we developed an overlapping generations model with public and private education, a pay-as-you-go pension system, endogenous fertility, and probabilistic voting on pensions and education spending. In this model, an increase in income inequality increases public education and pensions spending per enrolled student and retiree, respectively, and decreases the participation in public education and fertility. An increase in the share of retirees in the economy decreases the per student spending on public education and pensions, while decreasing the participation in public education and the fertility rate. The empirical evidences from OECD countries confirm our theoretical predictions regarding public education spending.

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