Palestinian residents of the West Bank and Gaza Strip who work in Israel generally earn more than Palestinians employed locally, but this wage premium is highly volatile. Beginning with the 1987 Palestinian uprising, changes in wage differentials by work location parallel Palestinian absences from work in Israel. This article interprets changing location differentials in response to exogenous shocks as movements along an Israeli demand curve for migrant workers. Estimates of a model of the West Bank and Gaza Strip labor market are used to evaluate the effect of policies governing Palestinian access to the Israeli labor market.

The view that empirical strategies in economics should be transparent and credible now goes almost without saying. By revealing for whom particular instrumental variables (IV) estimates are valid, the local average treatment effects (LATE) framework helped make this so. This lecture uses empirical examples, mostly involving effects of charter and exam school attendance, to illustrate the value of the LATE framework for causal inference. LATE distinguishes independence conditions satisfied by random assignment from more controversial exclusion restrictions. A surprising exclusion restriction is shown to explain why enrollment at Chicago exam schools reduces student achievement. I also make two broader points: IV exclusion restrictions formalize commitment to clear and consistent explanations of reduced‐form causal effects; the credibility revolution in applied econometrics owes at least as much to compelling empirical analyses as to methodological insights.

This study uses Social Security data on the earnings of military applicants to the all-volunteer forces to compare the earnings of Armed Forces veterans with the earnings of military applicants who did not enlist. Matching, regression, and Instrumental Variables (IV) estimates are presented. The matching and regression estimates control for most of the characteristics used by the military to select qualified applicants from the military applicant pool. The IV estimates exploit an error in the scoring of exams used by the military to screen applicants between 1976 and 1980. All the estimates suggest that soldiers who served in the early 1980s were paid considerably more than comparable civilians while in the military. Military service also appears to have led to a modest (less than 10 percent) increase in the civilian earnings of nonwhite veterans while actually reducing the civilian earnings of white veterans. Most of the positive effects of military service on civilian earnings appear to be attributable to improved employment prospects for veterans.

I use micro data from the Labor Force Surveys conducted in the West Bank and the Gaza Strip during 1981-1991 to show that during 1981-1987 wage differences between schooling groups fell by well over one-half. This sharp reduction is associated with large increases in the size of the educated Palestinian labor force. Since the returns to schooling for Israeli Jews were stable, the decline in returns to schooling for Palestinians is consistent with the notion that the returns to schooling in the territories were determined largely by the forces of supply and demand in a segmented market for skilled labor.

The randomly assigned risk of induction generated by the draft lottery is used to construct estimates of the effect of veteran status on civilian earnings. These estimates are not biased by the fact that certain types of men are more likely than others to service in the military. Social Security administrative records indicate that, in the early 1980s, long after their service in Vietnam had ended, the earnings of white veterans were approximately 15 percent less than the earnings of comparable nonveterans. Copyright 1990 by American Economic Association.

World War II veterans earn more than nonveterans in their cohort. We test whether the World War II veteran premium reflects nonrandom selection into the military of men with higher earnings potential. The estimation is based on the fact that from 1942 to 1947 priority for conscription was determined by date of birth. Information on individuals' dates of birth may therefore be used to construct instrumental variables for veteran status. Empirical results from the 1960, 1970, and 1980 censuses, along with two other microdata sets, support a conclusion that World War II veterans earn no more than comparable nonveterans and may well earn less.

School officials and legislators have long been concerned with the possibility of declining teacher quality (see e.g., Sean Corcoran et al., 2002). Beginning in the 1960's, states began testing prospective teachers in a direct effort to ensure that teachers meet minimum standards for basic skills and subject knowledge. By 1999, 41 states required applicants to pass some sort of standardized certification test. As a theoretical matter, however, the impact of such testing is ambiguous. Test requirements may establish a minimum achievement standard, as their proponents hope. On the other hand, testing and other certification requirements may deter some qualified applicants from teaching if these requirements are perceived as costly. This is the barriers-to-entry story first noted in the occupational licensing context by Milton F. Friedman and Simon Kuznets (1945). Another concern with job applicant testing is the possibility of an adverse impact on minority candidates, who usually do worse on tests (see David Autor and David Scarborough [2003] for a recent study). Paralleling increased state involvement in teacher certification is the increase in teachers' educational credentials, especially in public schools. For example, in 1971, over two-thirds of public-school teachers had a B.A., while only 27 percent had a master's or education specialist's degree. By 1991, however, over half of public school teachers (52.6 percent) had a master's or education specialist's degree. In contrast, the proportion of private-school teachers

Financial aid from the Susan Thompson Buffett Foundation (STBF) provides comprehensive support to a student population similar to that served by a host of state aid programs. In conjunction with STBF, we randomly assigned aid awards to thousands of Nebraska high school graduates from low-income, minority, and first-generation college households. Randomly assigned STBF awards boost bachelor’s (BA) degree completion for students targeting four-year schools by about 8 points. Degree gains are concentrated among four-year college applicants who would otherwise have been unlikely to pursue a four-year program. Degree effects are mediated by award-induced increases in credits earned toward a BA in the first year of college. The extent of initial four-year college engagement explains differences in impact by target campus and across covariate subgroups. The projected lifetime earnings effect of awards exceeds marginal educational spending for all of the subgroups examined in the study. Projected earnings gains exceed funder costs for urban students and for students with relatively weak academic preparation.

We establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws. Individuals born in the beginning of the year start school at an older age, and can therefore drop out after completing less schooling than individuals born near the end of the year. Roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws. We estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education. The instrumental variables estimate of the return to education is close to the ordinary least squares estimate, suggesting that there is little bias in conventional estimates.