Human Capital Investment and Teacher Recruitment
Saturday, Jan. 7, 2017 2:30 PM – 4:30 PM
Hyatt Regency Chicago, McCormick
- Chair: Cecilia Machado, Getulio Vargas Foundation
Human Capital Investment When Sheepskin Effects Matter: Evidence From Income Shocks in Indonesia
AbstractThis paper demonstrates the importance of perceived returns to schooling in explaining
limited education attainment in developing countries. I investigate whether dropout decisions
in Indonesia are consistent with perceived sheepskin effects – a nonlinear increase
in wage returns to completing the final grade of an education level. Exploiting four types
of negative income shocks, I find that while such shocks adversely impact children's average
enrollment probabilities, this impact is strongly mitigated for students entering the
final grades of junior and senior high school, consistent with households expecting higher
return from such grades. Moreover, even poor households exhibit this behavior – indicating
that even the poor are able to continue investments in education when they perceive
returns to be sufficiently high.
Who Wants to be a Teacher?
AbstractDuring the last three decades many countries have taken a series of steps to hold schools accountable for the performance of their students. The spirit of these reforms was to improve teacher performance by encouraging them to exert more effort on the job. However, less attention has been paid to understand the determinants of the overall quality of teachers. More specifically, a primary mechanism by which instructional quality can be affected is through selection. In this regard, we study whether teachers have become less talented over time. To answer this question, we combine register data for the whole population of Swedish teachers and non-teachers with cognitive and non-cognitive tests from military enlistment, performance in high-school, and detailed labor market outcomes. We find that over time teacher talent has indeed dropped drastically and pervasively (i.e., across gender, age, the talent distribution and different measures, rural and urban locations, and school types). For example, in 1985 young primary and secondary school teachers on average were about 2/3 of a standard deviation higher on cognitive ability than the rest of the population. This difference had almost disappeared by 2013.
We then investigate the reasons for this decline by estimating a structural model that links the college major decision process to future earnings. Our findings show that the declining earnings opportunities in the teaching profession play a key role in explaining the large drop on teacher skill quality over time. More specifically, we find that teachers’ average wages fell and their distribution became more compressed over time compared to wages in the private sector. This resulted in depressed incentives for talented individuals to enter the teaching profession.
- I0 - General