Paul J. Devereux

Recent developments in intergenerational mobility

Economists and social scientists have long been interested in intergenerational mobility, and documenting the persistence between parents and childrens outcomes has been an active area of research. However, since Gary Solons 1999 Chapter in the Handbook of Labor Economics, the literature has taken an interesting turn. In addition to focusing on obtaining precise estimates of correlations and elasticities, the literature has placed increased emphasis on the causal mechanisms that underlie this relationship. This chapter describes the developments in the intergenerational transmission literature since the 1999 Handbook Chapter. While there have been some important contributions in terms of measurement of elasticities and correlations, we will focus primarily on advances in our understanding of the forces driving the relationship and less on the precision of the correlations themselves.

Staying in the Classroom and out of the maternity ward? The effect of compulsory schooling laws on teenage births

This article investigates whether increasing mandatory educational attainment through compulsory schooling legislation encourages women to delay childbearing. We use variation induced by changes in compulsory schooling laws in both the US and Norway to estimate the effect in two very different institutional environments. We find evidence that increased compulsory schooling does in fact reduce the incidence of teenage childbearing in both the US and Norway, and these estimates are quite robust to various specification checks. These results suggest that legislation aimed at improving educational outcomes may have spillover effects onto the fertility decisions of teenagers.

Too Young to Leave the Nest: The Effects of School Starting Age

Using Norwegian data, we examine effects of school starting age (SSA). Unlike much recent literature, we can separate SSA from test age effects using scores from IQ tests taken outside school at about age 18. We find a small, negative effect of starting school older but much larger positive effects of age at test. Also, starting older leads to lower earnings until about age 30. We find little impact of SSA on educational attainment, but boys who start older are less likely to have poor mental health at age 18. Additionally, starting school older has a negative effect on the probability of teenage pregnancy.

Forced to Be Rich? Returns to Compulsory Schooling in Britain

Do students benefit from compulsory schooling? Researchers using changes in compulsory schooling laws as instruments have typically estimated very high returns to additional schooling that are greater than the corresponding OLS estimates and concluded that the group of individuals who are influenced by the law change have particularly high returns to education. That is, the Local Average Treatment Effect (LATE) is larger than the average treatment effect (ATE). However, studies of a 1947 British compulsory schooling law change that impacted about half the relevant population have also found very high instrumental variables returns to schooling (about 15%), suggesting that the ATE of schooling is also very high and higher than OLS estimates suggest. We utilize the New Earnings Survey Panel Data-set (NESPD), that has superior earnings information compared to the datasets previously used and find instrumental variable estimates that are small and much lower than OLS. In fact, there is no evidence of any positive return for women and the return for men is in the 4-7% range. These estimates provide no evidence that the ATE of schooling is very high.

The Cyclicality of Real Wages within Employer-Employee Matches

Using data from the Panel Study of Income Dynamics, the author examines the cyclicality of wages within employer-employee matches for the years 1970–91. Recent research on wage cyclicality has suggested that wages are very procyclical (tending to rise and fall with economic upturns and downturns), even for workers who remain with the same employer. The author finds, however, that the evidence for wage procyclicality within the matches he examines is rather weak except for the small group of workers who were paid by piece rate or commissions. Despite having acyclical wage rates, men who were paid hourly had earnings movements that were very procyclical. Salaries exhibited little cyclicality, but salaried workers who had income sources from bonuses, commissions, or overtime had procyclical earnings. The results suggest that the increasing prevalence of incentive-based pay will increase the procyclicality of wages within matches.

Small Family, Smart Family? Family Size and the IQ Scores of Young Men

This paper uses Norwegian data to estimate the effect of family size on IQ scores of men. Instrumental variables (IV) estimates using sex composition as an instrument show no significant negative effect of family size; however, IV estimates using twins imply that family size has a negative effect on IQ scores. Our results suggest that the effect of family size depends on the type of family-size intervention and that there are no important negative effects of expected increases in family size. However, unexpected shocks to family size resulting from twin births have negative effects on the IQ scores of existing children.

Occupational Upgrading and the Business Cycle

Many economics theories suggest that the assignment of workers to occupations changes over the business cycle: expansions allow workers to upgrade to occupations that pay higher wages and require more skill. This paper provides some empirical evidence from the USA that such upgrading does occur and that, as predicted, it has greater effects on less-skilled individuals. Furthermore, the skill composition of new hires changes over the business cycle, even within occupations. Consistent with a job competition model, the education levels of new hires within occupations are higher when the unemployment rate is high and this effect is more pronounced in lower-paying occupations. The changes in assignment imply that low-skilled individuals suffer most from recessions in terms of occupation quality and unemployment. The results are consistent with employers responding to a greater supply of educated workers by increasing hiring standards, and so imply that the social return to education may be lower than the private return. However, the results are also consistent with more neo-classical models of the labor market.

Care Or Cash? The Effect Of Child Care Subsidies On Student Performance

Given the wide use of child care subsidies across countries, it is surprising how little we know about the effect of these subsidies on childrens longer-run outcomes. Using a sharp discontinuity in the price of child care in Norway, we are able to isolate the effects of child care subsidies on both parental and student outcomes. We find very small and statistically insignificant effects of child care subsidies on child care utilization and parental labor force participation. Despite this, we find significant positive effect of the subsidies on childrens academic performance in junior high school, suggesting that the positive shock to disposable income provided by the subsidies may be helping to improve childrens scholastic aptitude.

Task Assignment over the Business Cycle

In this article, I evaluate the hypothesis that firms respond to negative demand shocks by assigning workers to tasks that require less skill than the tasks they normally carry out. Using changes in employment in state‐industry cells as a measure of demand conditions facing individual firms, I provide evidence in favor of the hypothesis. Furthermore, the skill requirements of the tasks carried out by workers are procyclical. The results are consistent with a specific capital model where employers move workers between tasks so that layoffs are concentrated on workers with low levels of firm‐specific human capital.

The Spot Market Matters: Evidence on Implicit Contracts from Britain

Based on the methodology of Beaudry and DiNardo (1991), this paper investigates the relative importance of the spot market and implicit contracts in the determination of British real wages. Empirical work is carried out separately for males and females with individual-level data taken from the New Earnings Survey Panel for the years 1976 to 2001. In contrast to previous studies that used North American data, the spot market is found to be more important than implicit contracts in determining real wages. Indeed, there is very little support for implicit contracts in these data. Further evidence is provided through the analysis of individual wage sequences. These suggest that the downwardly rigid wage sequences implied by implicit contracts with costless worker mobility are not prevalent in Britain.