Michael Simkovic

The Economic Value of a Law Degree

We investigate the economic value of a law degree and find that for most law school graduates, the present value of a law degree typically exceeds its cost by hundreds of thousands of dollars. The median and 25th-percentile earnings premiums justify enrollment. We track lifetime earnings of a large sample of law degree holders. Previous studies focused on starting salaries, generic professional degree holders, or the subset of law degree holders who practice law. We incorporate unemployment and disability risk and measure earnings premiums separately for men and for women. After controlling for observable ability sorting, we find that a law degree is associated with median increases of 73 percent in earnings and 60 percent in hourly wages. The mean annual earnings premium is approximately

The Effects of Ownership and Stock Liquidity on the Timing of Repurchase Transactions

57,200 in 2013 dollars. Values in recent years are within historical norms. The mean pretax lifetime value of a law degree is approximately

Timing Law School

1 million.

Limited Liability and the Known Unknown

We analyze detailed monthly data on U.S. open market stock repurchases (OMRs) that recently became available following stricter disclosure requirements. We find evidence that OMRs are timed to benefit non-selling shareholders. We present evidence that the profits to companies from timing repurchases are significantly related to ownership structure. Institutional ownership reduces companies’ opportunities to repurchase stock at bargain prices. At low levels, insider ownership increases timing profits and at high levels it reduces them. Stock liquidity increases profits from timing OMRs.

Value of a Law Degree by College Major

We investigate whether economic conditions at labor market entry predict long-term differences in law graduate earnings. We find that unemployment levels at graduation continue to predict law earnings premiums within 4 years after graduation for earners at the high end and middle of the distribution. However, the relation fades as law graduates gain experience and the difference in lifetime earnings is moderate. This suggests that earnings figures from After the JD II and III -- which track law graduates who passed the bar exam in 2000 -- are likely generalizable to other law cohorts because these studies are outside the window when graduation conditions predict differences in subsequent earnings.Outcomes data available prior to matriculation do not predict unemployment or starting salaries at graduation. Earnings premiums are not predicted by BLS projected job openings. While changes in cohort size predict changes in the percent of law graduates practicing law, we find little evidence that changes in cohort size predict changes in earnings. This suggests that law graduates who switch to other occupations when law cohort sizes increase are not hurt financially by larger cohorts. For medium to high earning graduates, successfully timing law school predicts a higher value of a law degree ex-post, but simulations show that no strategy for ex-ante timing is readily available.This article has been accepted for publication in the Journal of Empirical Legal Studies.A powerpoint presentation of an earlier version of this article is available at: http://ssrn.com/abstract=2612634.

Risk-Based Student Loans

Private firms often withhold information or contest scientific knowledge when public revelation could lead to costly regulations or liability. This concealment leads to negative externalities and public harm. But what if private firms’ superior knowledge and self-interest could be harnessed to reveal information about risks and accelerate the implementation of safety regulations? In Limited Liability and the Known Unknown, I argue that firms that desire limited liability for their investors should be forced to pay what they believe limited liability is worth. This would have several salutary effects. Firms’ choice between unlimited liability and higher taxes would reveal important information about internal risk assessments, reduce public-private information asymmetries, and accelerate the application of scientific knowledge to personal and public health.

Secret Liens and the Financial Crisis of 2008

We estimate the increase in earnings from a law degree relative to a bachelor’s degree for graduates who majored in different fields in college. Students with humanities and social sciences majors comprise approximately 47 percent of law degree holders compared to 23 percent of terminal bachelor’s. Law degree earnings premiums are highest for humanities and social sciences majors and lowest for STEM majors. On the other hand, among those with law degrees, overall earnings are highest for STEM and Business Majors. This effect is fairly small at the low end of the earnings distribution, but quite large at the top end. The median annual law degree earnings premium ranges from approximately

Competition and Crisis in Mortgage Securitization

29,000 for STEM majors to

Leveraged Buyout Bankruptcies, the Problem of Hindsight Bias, and the Credit Default Swap Solution

45,000 for humanities majors.