[A local governmental welfare function is specified to explore two of its central characteristics: the equity-productivity tradeoff and differential weights across neighborhoods. The model is estimated using service outputs (safety) in the welfare function, as opposed to publicly provided inputs (police), over neighborhoods. The equity-productivity tradeoff is found to be considerable, and not all neighborhoods are weighted equally. The estimation results raise several questions about accepted analysis of governmental behavior.]

Although much research discusses the quantity of schooling as an effective impact on productivity and earnings, most such research leaves out the idea of the quality of schooling which may cause biases in the estimated returns to schooling. This paper, consequently, attempts to extend the standard Mincerian approach to incorporate school quality as well as quantity. It demonstrates how exclusion of quality in the standard procedure may cause biases in the estimated returns to years of schooling, probably in the upward direction. The paper explores the implications of this extension of the standard model for the case of young Brazilian males. It shows that the estimate of the private return to years of schooling using the preferred quality-inclusive specification is only one-half the estimate using the standard procedure, indicating substantial upward bias in the standard estimates. It further outlines a method for estimating a social return to quality and finds that it exceeds substantially the social return to quantity. The paper then shows why this in turn suggests there may be an equity-productivity trade-off in schooling investments.

Parents can transmit income and wealth to their offspring directly through bequests and gifts of financial assets. Parents can augment a child's skills and traits through the provision of, for example, education, diet and doctors. Biological parents also supply the genetic endowments which provide skills useful in the labor market. Although practically a virgin territory, it is important to estimate the effects of genetic endowments and common (mostly family) environment on earnings and on other indices of individual attainment in order to gauge the effectiveness of programs designed to improve equality of opportunity. Also if genetics and common environment are not controlled for, biased estimates of regression coefficients of observable variables, such as years of education, often are obtained.