Joop Hartog

Over-education and earnings: where are we, where should we go?

Drawing on empirical studies from five countries spanning an interval of two decades, regularities in the incidence of over- and undereducation are outlined, as well as consequences for individual earnings. The results are confronted with three theoretical models (search, human capital and assignment), but none of these is convincingly related to the specification of the earnings function. Directions for further work are suggested.

Low risk aversion encourages the choice for entrepreneurship : An empirical test of a truism

Entrepreneurship is historically associated with risk bearing. Consequently, risk attitude is widely believed to affect the selection of individuals into entrepreneurial positions. The data support the supposedly negative effect of risk aversion on entrepreneurship selection. However, we do not feel enough confident about our measure of risk attitude to conclude anything concerning the causality of this relationship.

Education, allocation and earnings in the Netherlands: 0verschooling?

Abstract This paper documents the increased participation in higher education in the Netherlands and its consequences for the relation between levels of education and job levels. Undereducation has been reduced, overeducation has been increased. This does not imply private or social inefficiency, as even years of “overeducation” earn a positive rate of return. A general specification of the earnings function is derived from allocation models of the labor market. It contains the human capital specification and the job competition specification as special cases, and proves superior to both.

If You Are So Smart, Why Aren't You an Entrepreneur? Returns to Cognitive and Social Ability: Entrepreneurs Versus Employees

How valuable are cognitive and social abilities for entrepreneurs’ incomes as compared to employees? We answer three questions: (1) To what extent does a composite measure of ability affect an entrepreneurs earnings relative to employees? (2) Do different cognitive abilities (e.g. math ability, language ability) and social ability affect earnings of entrepreneurs and employees differently?, and (3) Does the balance in these measured ability levels affect an individuals earnings? Our individual fixed-effects estimates of the differential returns to ability for spells in entrepreneurship versus wage employment account for selectivity into entrepreneurial positions as determined by fixed individual characteristics. General ability has a stronger impact on entrepreneurial incomes than on wages. Entrepreneurs and employees benefit from different sets of specific abilities: Language and clerical abilities have a stronger impact on wages, whereas mathematical, social and technical ability affect entrepreneurial incomes more strongly. The balance in the various kinds of ability also generates a higher income, but only for entrepreneurs: This finding supports Lazears Jack-of-all-Trades theory. This discussion paper resulted in a publication in the Journal of Economics and Management Strategy 19(4), 947-89.

Changing returns to education in Portugal during the 1980s and early 1990s: OLS and quantile regression estimators

This paper examines the evolution of the returns to education in Portugal over the 1980s and early 1990s. The main findings indicate that the returns to education have increased, particularly after joining the European Union in 1986. Since this occurred along with an increase in the level of education within the labour force, the process is most likely demand driven. The results also indicate that modelling on average (i.e. OLS) misses important features of the wage structure. Quantile regression (QR) analysis reveals that the effect of education is not constant across the conditional wage distribution. They are higher for those at higher quantiles in the conditional wage distribution. Wage inequality expanded in Portugal over the 1980s and the returns to education had an important role in this process.

Public and private sector wages in the Netherlands

Abstract There is much debate in the Netherlands about underpayment of public sector workers relative to private sector workers. In this paper we analyze the wage structures in both sectors, using an endogenous switching regression model. Unlike previous Dutch studies, we find that the earnings prospects of public sector workers are better in the public sector than in the private sector. For private sector workers we find the exact opposite; their earnings prospects are better in the private sector. Moreover the allocation over sectors points to comparative advantages.

Can Students Predict Starting Salaries? Yes!.

Abstract We use Dutch panel data in which students have been asked to state their expected starting salary and confront these with realisations four years later. Both level and structure of expectations and realisations are remarkably close: we barely find systematic under- or overestimation effects.

On Human Capital and Individual Capabilities

Starting out from a simple conceptual framework running from initial individual abilities to skills produced in school to the utilization of these skills in the labor market, this paper surveys empirical studies in labor economics, economics of education and occupational psychology to assess the empirical strength of the links between these sets of variables. Cognitive and non-cognitive abilities are relevant for economic success, but make a modest contribution. Occupational psychology is complementary to economics and supports the notion of interlocking heterogeneity of individuals and jobs. Copyright 2001 by The International Association for Research in Income and Wealth.

AN EMPIRICAL ANALYSIS OF UNIVERSITY CHOICE AND EARNINGS

SummaryIn this paper we analyze the relations between university choice and earnings. We estimate a model in which a choice function determines the decision to apply to a particular university and thereby the switch to a particular wage regime. The wage structures of the options in turn determine the lifetime earnings prospects associated with those options, and these prospective earnings influence university choice. The results reveal some notable differences between the wage structures of graduates from different universities. In the choice function we find that graduates from different universities differ with respect to social background, gender and the motives that they consider important in choosing a department. A test on the possibility of pooling alternatives establishes heterogeneity of departments. Finally, we find that earnings prospects are not a particularly important factor in the choice of a specific university.

Earnings functions: Testing for the demand side

Abstract To analyze labor market phenomena, one may simultaneously grade workers (by education) and jobs (by level of difficulty and complexity). Human capital theory predicts earnings based on only worker quality. Thurows version of a segmented labor market theory predicts that only the job level is relevant, and the assignment theory predicts that both variables are relevant. Using three different data sets for The Netherlands, testing demonstrates convincingly the superiority of the assignment theory.