Knowledge that Transforms

We study the effects of the Mexican conditional cash transfer program Progresa on school enrollment and performance in passing grades. We develop a theoretical framework of the dynamics of the educational process including endogeneity and uncertainty of school performance. Using a randomized experiment implemented under Progresa, we identify the effect of the program on enrollment and performance in the first year of the program. We find that the program had a positive impact on school enrollment at all grade levels, whereas for performance it had a positive impact at the primary school level but a negative impact at the secondary level.

Promotions play an important role for the provision of incentives in firms. We analyze incentives in multistage elimination tournaments with controlled laboratory experiments. In our two main treatments, we compare a two-stage tournament to a one-stage tournament. Subjects in the two-stage treatment provide excess effort in the first stage, both with respect to Nash predictions and compared to the strategically equivalent one-stage tournament. Additional control treatments confirm that excess effort in early stages is a robust finding and suggest that above-equilibrium effort might be driven by limited degrees of forward-looking behavior and subjects deriving nonmonetary value from competing.

In this article, we examine optimal job choices when jobs differ in the rate at which they reveal information about workers’ skills. We then analyze how the optimal level of experimentation changes over a worker’s career and characterize job transitions and wage growth over the life cycle. Using the Dictionary of Occupational Titles merged with the National Longitudinal Survey of Youth 1979, we then construct an index of how much information different occupations reveal about workers’ skills and document patterns of occupational choice and wage growth that are consistent with a trade-off between information and wages.

We show that the reported tendency for performance pay to be associated with greater wage inequality at the top of the earnings distribution applies only to white workers. This results in the white-black wage differential among those in performance pay jobs growing over the earnings distribution even as the same differential shrinks over the distribution for those not in performance pay jobs. We show that this remains true even when examining suitable counterfactuals that hold observables constant between whites and blacks. We explore reasons behind our finding focusing on the interactions between discrimination, unmeasured ability, and selection.

The employment to population rate of high school–aged youth has fallen by about 20 percentage points since the late 1980s. One potential explanation is increased competition from substitutable labor, such as immigrants. I demonstrate that the increase in the population of less educated immigrants has had a considerably more negative effect on employment outcomes for native youth than for native adults. At least two factors are at work: there is greater overlap between the jobs that youth and less educated adult immigrants traditionally do, and youth labor supply appears more responsive to immigration-induced wage changes.

Despite the importance of expectations in models of decision behavior under uncertainty, few empirical economists have made use of subjective expectations data in estimating such models. Assuming that expectations about future behavior accurately portray optimal future behavior conditional on current information, it is shown that such data can provide similar information about the decision process as can data on current or retrospective behavior. The value of self-reported choice expectations is illustrated by using information on respondents’ expected future occupation in the estimation of a structural dynamic model of teacher career decisions under uncertainty.

Using large American and British survey data, this paper provides structural estimates of the production functions for birth weight and fetal growth. In addition to maternal smoking, we estimate the impact of when a mother stops work, which has not been considered in the literature. Mothers’ work interruptions of up to 3 months before birth have a positive effect on birth outcomes, especially among British children. Parental behavior appears to respond to child idiosyncratic endowments in a way that suggests that parents have inequity aversion concerns. Evidence in favor of inequity aversion emerges also from the analysis of breast-feeding decisions.

We examine changes in the characteristics of American youth between the late 1970s and the late 1990s, with a focus on characteristics that matter for labor market success. The current generation is more skilled than the previous one. Blacks and Hispanics have gained relative to whites, and women have gained relative to men. However, the skill distribution has widened overall. Shifts in parental education generate many of the observed changes. We also provide speculative estimates suggesting that if recent trends in technology and the supply of human capital continue, wage inequality will increase substantially by 2025.

An extensive theoretical literature investigates the role of promotions as a signal of worker ability. We extend the theory by focusing on how the signaling role of promotion varies with education and then investigate the resulting predictions using a longitudinal data set that contains detailed information concerning the internal-labor-market history of a medium-sized firm in the financial services industry. Our results support signaling being important for understanding the differences between promotion practices concerning bachelor’s and master’s degree holders, while the evidence concerning the importance of signaling for high school graduates and PhDs is mixed.

This article proposes a new approach to modeling heterogeneous human capital using task data from the Dictionary of Occupational Titles. The key feature of the model is that it departs from the Roy model, which treats occupations as distinct categories and conceives of occupations as bundles of tasks. The advantages of this approach are that it can accommodate many occupations without computational burden and provide a clear interpretation as to how and why skills are differently rewarded across occupations. The model is structurally estimated by the Kalman filter using the National Longitudinal Survey of Youth 1979.