George E. Johnson

Social Returns to Quantity and Quality of Schooling

The authors find high but diminishing marginal returns to investment in expenditures per pupil per year. The study suggests the desirability of increased educational quality in school districts with lower per pupil expenditures so as to equalize the returns to years and annual expenditure per student. (Necessarily, there should be optimization in the way inputs are combined as the school systems move to new output levels-consolidation being a pertinent example.) Since expenditure per student also affects years of schooling attained, a policy of improving the relative quality of school systems in poverty areas may partially offset inherited economic disadvantages.

Subsidies for Higher Education

Who should pay the resource costs of higher education? This paper investigates a simple model of the general equilibrium of the labor market with three skill levels. Those in the population with the lower level of intelligence and/or sophistication can only become low-skilled workers, but the brighter segment of the population can become either high- or medium-skilled workers. Given the tax structure, the welfare of each group is maximized by a unique subsidy rate on the cost of training high-skilled workers. Under several circumstances, the lower IQ group wants a higher subsidy rate than will the group that benefits directly from the training.

Lifetime Earnings in a Professional Labor Market: Academic Economists

It is hypothesized that persons who are more able and who enter the profession earlier in life purchase, through foregone earnings, more training options upon receipt of the Ph.D. and hence have more precipitous earnings profiles than those who are less able and who enter later. By using National Science Foundation Register data from 1964 to 1970, earnings of economists and other academics are compared by age cohort both cross-sectionally and over time. Defining junior and senior faculty as the two inputs producing instructional services and assuming a homothetic production function, a substitution elasticity of about five is estimated.

The Fiscal Substitution Effect of Alternative Approaches to Public Service Employment Policy

The size of the fiscal substitution effect is important in evaluating public service employment as either a counter-cyclical policy or as revenuesharing. Empirically, the effect appears to be very small for one or two quarters, but rises to about 100 percent after five quarters. From an antipoverty perspective, however, composition effects are most important. Although PSE program employees appear representative of the total labor force, the proportion of the disadvantaged among PSE participants is greater than the proportion of them in state and local government employ-

On the rate of return to schooling quality

Empirical evaluation of the effect of school quality, or type and amount of resources per student, on adult earnings requires a conceptual framework. A model of the returns to schooling in a simple human capital growth context is extended to illustrate how factors such as consumption benefits of students, parental concern over equity between siblings, and use of schools to facilitate parental labor supply can alter the apparent return to school quality. The need for microlevel time diary and other data on human capital formation in both classrooms and families is highlighted. Copyright 1996 by MIT Press.

Comment on A. Oswald, “The Economic Theory of Trade Unions—An Introductory Survey”

The importance of trade unions in any useful analysis of the behavior of aggregate economic variables in most O.E.C.D. countries has recently come to be widely recognized. If unions represent most workers (as in Scandinavia) or even workers in a significant minority of industries (as in the United States), their existence cannot simply be ignored. Any plausible economic theory of what trade unions attempt and are able to do would suggest that they will have a major impact on the general level and/or structure of real wages, and any sensible theory of employment determination would imply that wage rates will have an impact on the equilibrium unemployment rate. Thus, public policy toward trade unions may be an important component of macroeconomic policy. There is, therefore, a great deal of incentive to build good microeconomic models of trade union behavior, for these might provide useful insights into the way the aggregate economy operates.

Chapter 34 The labor market implications of international trade

Abstract The general equilibrium analysis of many important labor market issues is very different in an economy that is open to international trade than an economy (like the US in the 1950s) in which trade is not very important. Despite the fact that individual national economies have become increasingly interdependent over the last few decades, labor economists have generally used a closed economy framework to attack many important issues (such as the determinants of the distribution of earnings) that should, in fact, be approached very differently in an open economy setting. A major task of this paper is the exposition of the correct approach to labor market analysis for the case in which the focus economy is open rather than closed. Perhaps the most important implication of neoclassical trade theory for labor economics is that, under certain conditions, the skill distribution of wages in a particular economy is unaffected by the skill distribution of the supply of labor in that economy. Our review of the trade literature focuses on the question of the degree to which these conditions are likely to be satisfied. Our general conclusion — inspired more from the empirical than the purely theoretical branch of the trade field — is that the correct specification of the behavior of the labor market is a blend of the closed and open models.

“Petit Déjeuner Compris” – Is It Really Free? Evidence from French and Italian Hotels

Despite the old claim in economics that “there is no such thing as a free lunch,” some of the recent work in behavioral economics and in other fields of study implies the contrary. In this paper I study whether French and Italian hotels actually provide a “free” breakfast when, as is done by many hotels around the world, its provision is included in the room price. The data indicate, using both cross-sectional comparisons and hotel-specific changes in breakfast provision, that there is no such thing as a free breakfast. In France and Italy hotels that offer, respectively, “petit dejeuner compris” and “compresa la prima colazione” appear to raise their room prices by 10 to 15 percent.