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Dynamic Skill Accumulation, Comparative Advantages, Compulsory Schooling, and Earnings

Author

Listed:
  • Christian Belzil

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique, IZA - Institute for the Study of Labor)

  • J. Hansen

    (IZA - Institute for the Study of Labor, CIREQ - Centre Interuniversitaire de Recherche en Economie Quantitative, CIRANO - Montréal, Department of Economics, Concordia University - Concordia University [Montreal])

  • Xingfei Liu

    (Department of Economics, Concordia University - Concordia University [Montreal])

Abstract
We show that a calibrated dynamic skill accumulation model allowing for comparative advantages, can explain the weak (or negative) effects of schooling on productivity that have been recently reported (i) in the micro literature on compulsory schooling, ii) in the micro literature on estimating the distribution of ex-post returns to schooling, and (iii) in the macro literature on education and growth. The fraction of the population more efficient at producing skills in the market than in school is a pivotal quantity that determines the sign (and magnitude) of different parameters of interest. Our model reveals an interesting paradox; as low-skill jobs become more skill-enhancing (ceteris paribus), IV estimates of compulsory schooling become increasingly negative, and ex-post returns to schooling (inferred from a Roy model specification of the earnings equation) become negative for an increasing fraction of the population. This arises even if each possible input to skill production has a strictly positive effect. Finally, our model provides a foundation for the weak (or negative) effect education on growth measured in the empirical literature.

Suggested Citation

  • Christian Belzil & J. Hansen & Xingfei Liu, 2012. "Dynamic Skill Accumulation, Comparative Advantages, Compulsory Schooling, and Earnings," Working Papers hal-00657931, HAL.
    • Handle: RePEc:hal:wpaper:hal-00657931
    Note: View the original document on HAL open archive server: https://hal.science/hal-00657931
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    References listed on IDEAS

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    More about this item

    Keywords

    Dynamic Programming; Compulsory Schooling Reforms; Dynamic Skill Accumula- tion; Comparative Advantages; Returns to schooling; Education and Growth; Dynamic Discrete Choice; Dynamic Programming.;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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