Djavad Salehi-Isfahani

A COMPARATIVE STUDY OF RETURNS TO EDUCATION OF URBAN MEN IN EGYPT, IRAN, AND TURKEY

This paper presents a comparative study of private returns to schooling of urban men in Egypt, Iran, and Turkey using similar survey data and a uniform methodology. We employ three surveys for each country that span nearly two decades, from the 1980s to 2006, and, to increase the comparability of the estimates across surveys, we focus on urban men 20–54 years old and in full time wage and salary employment. Our aim is to learn how the monetary signals of rewards that guide individual decisions to invest in education are shaped by the institutions of education and labor markets in these countries. Our estimates generally support the stylized facts of the institutions of education and labor markets in Middle Eastern countries. Their labor markets have been described as dominated by the public sector and therefore relatively inflexible, and their education systems as more focused on secondary and tertiary degrees than teaching practical and productive skills. Returns in all countries are increasing in years of schooling, which is contrary to the Mincer assumption of linear returns but consistent with overemphasis on secondary and tertiary degrees. Low returns to vocational training relative to general upper secondary, which have been observed in many developing countries, are observed in Egypt and Iran, but not Turkey. This pattern of returns across countries seems to correspond to how students are selected into vocational and general upper secondary tracks, which is an important part of the education institutions of these countries, and the fact that Turkey’s economy is more open than the other two. Greater competitiveness in all three countries over time seems to have increased returns to university education and in few cases to vocational education, but not to general high school.

Human resources in Iran: potentials and challenges

Critics of economic development strategies followed by most Middle Eastern countries often point to their lagging human development indicators as a sign of failure. While it is true that the growth performance of these countries has been generally quite poor since the 1980s—only Sub-Saharan Africa has had a worse experience—it is not true that they have failed to expand education. In fact, the rate of growth of years of schooling in the Middle East and North Africa (MENA) has been the fastest of any region in the last forty years. The difficulty for economic growth appears to lie in translating this rising education into rising productivity. Doing so is not just a matter of restoring growth, though that is an essential task, but to alleviate acute social pressures arising from youth unemployment fuelled by rapid population growth. For quite a while these employment problems were solved by accumulation of physical capital bought with oil.With that option no longer viable, solutions for human resource problems must be found elsewhere, particularly in the markets for labor and human capital. This regional problem summarizes well the difficulties that Iran faces in the new century. Per person oil revenues, though relatively high in recent years, are still one-fourth of their peak in the mid-1970s. Despite a significant decline in the rate of population growth (halved from 3 percent per year in the 1970s to 1.5 percent in 2004), growth of the labor force is still quite high (about 3 percent per year) and employment problems for the rising number of young workers loom large. The youngest group of 15–24 year-olds is growing at 3.9 percent annually, making it very difficult to reduce unemployment despite relatively buoyant growth in recent years. Even if oil resources that financed Iran’s ambitious investment plans in the 1970s had kept apace, Iran would still be facing difficulties because in the last

Family planning and fertility decline in rural Iran: the impact of rural health clinics

During the first few years of the Islamic Revolution of 1979, and aided by pro-natal government policies, Iranian fertility was on the rise. In a reversal of its population policy, in 1989, the government launched an ambitious and innovative family planning program aimed at rural families. By 2005, the program had covered more than 90% of the rural population and the average number of births per rural woman had declined to replacement level from about 8 births in the mid 1980s. In this paper, we evaluate the impact of a particular feature of the program - health houses - on rural fertility, taking advantage of the variation in the timing of their construction across the country. We use three different methods to obtain a range of estimates for the impact of health houses on village-level fertility: difference-in-differences (DID), matching DID, and length of exposure. We find estimates of impact ranging from 4 to 20% of the decline in fertility during 1986-1996.

Inequality Of Opportunity In Child Health In The Arab World And Turkey

It is by now well established in the public health literature that health and nutrition in the first years of life are critical to health and wellbeing later in life. In this paper, we examine the patterns of inequality of opportunity in health and nutrition outcomes, such as height-for-age and weight-for-height, for children under 5 years of age in selected Arab Countries and Turkey, using Demographic and Health Survey (DHS) data. Our objective is to decompose inequality into a portion that is due to inequality of opportunity and a portion that is due to other factors, such as random variations in health and genetics. Inequality of opportunity is defined as the inequality that is due to differences in circumstances, such as parental characteristics, household wealth, place of birth and gender. We measure inequality using decomposable general entropy measures, such as the Theil-T index, and use parametric decomposition methods to determine the share of inequality of opportunity in total inequality. Results show that different levels and trends are evident across countries in both the overall inequality of child health outcomes and in the share of inequality of opportunity in total inequality. Inequality of opportunity is shown to contribute substantially to the inequality of child health outcomes, but its share in total inequality varies significantly both across countries and within countries over time. To further highlight the relative contribution of circumstances to the inequality of child health outcomes in different countries, we simulate height and weight outcomes for a most and least advantaged child in each context. Since these simulations set observed circumstances at their best and worst levels, the larger the difference in predicted outcomes between the most and least advantaged child, the larger is the inequality of opportunity facing children in that country.

Technology and preferences in the Boserup model of agricultural growth

Abstract This paper is an attempt to formalize the model of intensification of land use by Boserup (1965). Boserup has argued that population density is a precondition for adoption of intensive techniques of land use. Unless population pressure is high, subsistence cultivators are not motivated to give up entensive but highly productive techniques for more intensive but less productive techniques. This paper argues that contrary to what has been implied by some recent papers on the subject, the crux of Boserups model is a description of technology rather than behavior. The first part of the paper shows that the proper formalization of Boserups description of technology is a convex but not strictly convex production set. The second part considers a complete model in which utility maximizing cultivators faced with this technology choose optimal consumption and labor supply for given levels of population density. It is shown that when two techniques coexist, a quasi-concave utility function always results in intensification and when only a single technique is in use, the necessary and sufficient condition for intensification is that the marginal rate of substitution between consumption and leisure be elastic with respect to consumption.

Microeconomics of Growth in MENA: The Role of Households

Abstract This paper discusses whether households in the Middle East and North Africa (MENA) allocate their resources efficiently and in such a way as to promote growth. It focuses on the role of urban households because they form the majority and they are the main source of growth in human capital. I argue that an efficient and pro-growth allocation of household resources may not be feasible because of constraints that households face in their decisions to supply labor, and to accumulate human and physical capital. I identify two aspects of the environment in which MENA households operate as critical to conditioning their behavior: the large role of the state in the economy, which distorts the incentives in the education and labor markets, and social norms regarding gender, which influence the division of labor at home and in the economy. Patriarchal gender norms limit womens participation outside the home, resulting in higher fertility and lower labor force participation of women in MENA compared to countries with similar income. The strong role of the state affects incentives in three key markets for credit, education, and labor. Powerful central governments have inhibited the development of modern financial markets by preventing the emergence of private banking and an independent judiciary, which is critical for the enforcement of financial contracts. Distorted financial markets affect household savings by keeping interest rates low and often negative, and thereby discourage accumulation of financial assets relative to unproductive assets such as land. Of greater importance is state intervention in the markets for education and labor, which determine the amount and type of human capital the MENA households accumulate. I argue that the prevalence of public-sector employment and the regulation of private employment have increased private returns to formal schooling over and above their social return, while at the same time reduced private returns to other types of productive skills below their social return. As a result, households invest in an inefficient portfolio of human capital with dire consequences for long-run growth.

The Rise and Fall of Oil Prices: a Competitive View

This paper develops a competitive theory of the recent history of the oil market. We show that the supply curve for oil is backward bending, and that the presence of multiple equilibria explains better than cartel theories the behavior of the principal participants in this market. We study some implications of this theory for the short run and long run stability of the price.

Stalled Youth Transitions in the Middle East: A Framework for Policy Reform

Young people in the Middle East (15-29 years old) constitute about one-third of the regions population, and growth rates for this age group are the second highest after sub-Saharan Africa. Today, the entire Middle East region is experiencing a demographic boom along with an oil boom. The concurrence of sound economic growth and a large youthful working population create the social and political impetus for fundamental institutional change which can enable the region to capitalize on these twin dividends for lasting economic development. Thus, tapping the full potential of young people is one of the most critical economic development challenges facing the Middle East in the twenty-first century.In recent years, a number of policy frameworks have emerged to address youth transitions from education to employment and to family formation. These frameworks recognize that the critical transitions experienced by youth within a relatively short timeframe in turn have lifelong impacts on them, their families, and society at large.Building on these existing frameworks, this paper focuses on the role of markets and institutions in mediating youth transitions, namely education systems, labor and housing credit markets, and social norms governing marriage and family formation. Difficult youth transitions and social exclusion are interpreted as a consequence of failures in these market and non-market institutions. Economic and social policy should be designed to improve the institutional environment and create incentives that will allow youth to better manage their transitions to adulthood.

YOUTH TRANSITIONS TO EMPLOYMENT AND MARRIAGE IN IRAN: EVIDENCE FROM THE SCHOOL TO WORK TRANSITION SURVEY

Iran’s young men and women face serious challenges in their transitions to employment and marriage. We study the factors that affect these transitions using the 2005 School-to-Work Transition Survey (SWTS). As this survey contains detailed retrospective data of education, employment, and marital outcomes for youth ages 15–29, it provides a new and valuable tool for exploring the challenges facing these youth. In our analysis of the transition to employment, which employs discrete-time hazard models and probit models of women’s desire and actual labor force participation, we find that (1) the duration of unemployment increases secularly with men’s but not women’s education, (2) parental background significantly affects men but not women, and (3) labor force participation of a mother is the strongest predictor of a daughter’s labor force participation. For the transition to marriage, we find that job stability is the most important determinant of the age of marriage, as both years of employment and high quality employment contracts accelerate the marriage transition. Among women we find that the transition to marriage is delayed significantly by both work experience and increased education. We discuss the relevance of these findings in designing policies to help these youth in their transitions.

Youth Exclusion in Iran: The State of Education, Employment and Family Formation

With output and consumption growing at about 5 percent a year for over a decade, the Iranian economy today seems quite robust overall. Investment levels remain quite high and the road, electricity, water and natural gas infrastructures are well maintained. But the legal and institutional infrastructure remains underdeveloped. Much needed legal reform to deal with the requirements of a modern contractual economy has been overshadowed in recent years by political skirmishes over other aspects of legal improvements, including reform of the penal code and laws governing the freedom of the press. Property rights and the incentives for long-term private investment have been undermined by corruption and an unfavorable business environment.Amidst this macro-economic setting, a demographic burst, caused by high fertility rates in the late 1970s and early 1980s, has created new choices and challenges for todays youth in Iran. Traditional Iranian society offered a smoother and more predictable transition from youth to adulthood. But with the gradual disappearance of traditional society and rapid social and economic change, predictable transitions from youth to adulthood have given way to uncertainty and unpredictability. The unusually large cohort of youth today has led to overcrowding in schools, gender imbalance in the marriage market and increased pressure on Irans rigid formal labor market. Iran can take better advantage of this demographic dividend by turning the increased investment in the health and education of this youth cohort into higher productivity and economic growth by providing it with better opportunities for learning and employment.Using conceptual frameworks relating to social exclusion literature and life transitions, the inclusion of youth and their successful transition to adulthood is analyzed by looking at three dimensions: acquiring skills for productive employment, finding a job and setting up a family. In Iran, long spells of unemployment, measured in years rather than months, which deny young men and women the ability to marry and set up a home, have created conditions for exclusion of youth despite a low overall incidence of poverty and relatively high education. Special attention is paid to the difference in experiences of men and women and rich and poor individuals in transition to adulthood.