Heterogeneity In Returns Research Articles

Heterogeneous Returns to Education: Why are Medicine and Pharmacy Majors so Popular in South Korea?

ABSTRACT Medicine and pharmacy are the most popular undergraduate majors in South Korea. Unlike in the past, when a degree from a prestigious college was prioritised regardless of the field, many students now opt for lower-selectivity colleges to pursue these majors. This study examines why students are increasingly drawn to medicine and pharmacy by estimating the returns to both college prestige and major choice. The returns to college prestige show a declining trend, discouraging students from enrolling in highly selective institutions. The findings suggest that current hiring regulations based solely on college selectivity may be ineffective in promoting equity.

Self‐love, growth, and competition in a public good game

AbstractCompetition and cooperation are not always at odds and contributions to public goods are almost never one‐off one‐shot temporally isolated events. We examine voluntary contribution in a new public good experiment where “self‐love” competitive motivations and time dynamic interdependencies are simultaneously considered. The competitive motivations are manipulated via subjects competing in each group (intragroup competition) for higher return factors on their public expenditure, whereas time dynamic interdependencies are modeled by letting returns from previous periods available for future contributions to public goods (CG). We ran two control conditions where intragroup competition (C) and time dynamic interdependencies (G) are separately implemented. Our findings showed that shares of endowment contributed were significantly greater and increasing over time when endowments growth and heterogeneous returns factors were simultaneously introduced. This effect can be attributed to return factors obtained in previous periods. Accordingly, wealth exponential growth has been greatly accelerated relative to our control condition. Distributive equity concerns have been also documented. Although Gini coefficients were significantly lower in the presence of heterogeneous return factors and endowments growth, inequality trends seemed to converge at control condition values in the long term.

Identification of returns to new technologies under distinctive econometric approaches

ABSTRACT This article uses distinctive econometric models to investigate returns to new technologies and whether adoption decisions can be explained by comparative advantage. I consider three models: static and dynamic panel models of homogeneous returns to fertilizer, as well as the correlated random coefficient model of heterogeneous returns. I discuss both the benefits of using each of the models and their interpretations. I then use data from cocoa farming in Ghana to identify the returns to fertilizer by means of these three models. The estimated average returns in different models are positive, high and strongly significant statistically. I also find evidence of heterogeneous returns to new technology based on comparative advantage. My overall results suggest that adoption of new agricultural technologies may not necessarily benefit all farmers, and the adoption decision may be crop-specific, context-specific or technology-specific.

Public goods and bads with vulnerable individuals: How information and social nudges change behaviour

AbstractIn a diverse society, heterogeneous returns to public goods (PG) and public bads (PB) are more often the rule rather than the exception, and often the returns from the public pool are such that individuals who are most affected no longer have incentives to free ride on others. We consider this set‐up through a laboratory experiment and investigate how heterogeneity of marginal per capita returns (MPCRs) affect economic cooperation in both PG and PB games. We also examine whether information on heterogeneity—no information, information and information with a plea to help those who are most affected by the public pool—changes cooperation. Our results show that information regarding the heterogeneity does not change individual behaviour in both PG and PB games. However, a social plea to help individuals with MPCRs of 1.20 increases average group efficiency. Average individual contributions under the social plea treatment are either maintained or increased. Those with MPCRs of 1.20 are more cooperative than their counterparts but not as completely as theoretically predicted. The exact same individual is also more cooperative under a PG game than under a PB game; a result that remains unchanged whether MPCRs are homogeneous or heterogeneous.

Differences in Heterogeneous Returns to Foreign Language Use at Work Among Natives and Migrants in Europe

The cultural-demographic profile of Europe has been heavily influenced by migration dynamics over the past decades. The question is whether language diversity in a host country – in particular, language proficiency and foreign language use at work – has implications for the workers’ wages. Our study examines the heterogeneous impacts of foreign language use at work on earnings of both native-born workers and foreign-born workers. To that end, a Mincer earnings equation is specified. The model is tested by means of an extensive data set that captures all relevant variables. Despite the dated nature of the data used, several interesting outcomes on wage differentials in Europe – as a result of foreign language use at work – are found. First, for native-born workers with a tertiary diploma, using a foreign language at work is found to have an unambiguously positive impact on their earnings (2%). Second, for foreign-born workers, returns to foreign language use at work is highly complementary to education. Foreign language users below the upper secondary educational level earn significantly less (−8%) than those who use the local language at work. Third, a linguistically distant foreign language gives native-born workers the highest wage premium, while the use of EU official languages pays off the most for foreign-born workers. Fourth, our results do not show evidence that the lack of local language knowledge of low-educated migrants causes these results, as immigrants for whom the mother tongue is similar to the local language show similar outcome.

Cultural capital and higher education inequalities in contemporary China

AbstractThe relationship between cultural capital endowment and higher education inequalities can be better understood by approaching it in a non‐Western socio‐cultural order. This article brings together empirical studies on this theme in the social context of China. The examination‐oriented higher education system and the supplementary independent freshman/women recruitment complicate the role of cultural capital, entailing positive, null, or adverse effects. Although cultural capital offers little help for elite university attendance, it is linked to the preference of liberal arts majors via the performance in the standardized test. Cultural capital matters for the stratification of the higher education process concerning one's attitudes toward love and social capacities. Existing studies also present evidence for the heterogeneous returns of cultural capital and description of failed cases of middle‐class students and successful cases of disadvantaged students. Future directions of research are discussed.

Policy initiatives, self-sorting, and labor market effects of tertiary education for adult workers

We investigate the differences in labor market effects between a regular tertiary degree and a tertiary degree obtained while working a job. Using multiple-year data that span the drastic policy initiatives targeting on-job education in China, we find significantly lower returns to an on-job degree compared to a regular degree at the bachelor's and graduate levels, but no significant differences at the junior college level. However, when applying the correlated random coefficient model with heterogeneous returns, the estimated gaps from the conventional model disappeared in earlier years and reversed their signs in later years in general. We find that the results are affected by the extent of workers’ self-sorting into on-job schooling based on unobserved heterogeneity and anticipated future returns. Policies that change the returns to on-job degrees for specific workers can create different incentives and thus may alter the nature of self-selection for adult workers when pursuing education at work.

Selection Into Credit Markets: Evidence From Agriculture in Mali

We use a two‐stage experiment on agricultural lending in Mali to test whether selection into lending is predictive of heterogeneous returns to capital. Understanding this heterogeneity, and the selection process which reveals it, is critical for guiding modeling of credit markets in developing countries, as well as for policy. We find such heterogeneity: returns to capital are higher for farmers who borrow than for those who do not. In our first stage, we offer loans in some villages and not others. In the second stage, we provide cash grants to a random subset of all farmers in villages where no loans were offered, and to a random subset of the farmers who do not borrow in villages where loans were offered. We estimate seasonal returns to the grant of 130% for would‐be borrowers, whereas we find returns near zero for the sample representative of non‐borrowers. We also provide evidence that there are some farmers—particularly those that are poor at baseline—that have high returns but do not receive a loan.

What kind of region reaps the benefits of a currency union?

AbstractWhat is the economic impact of joining a currency union? Is this impact heterogeneous across regions? And how does it change in case of a recession? We answer these questions by investigating the economic impact of joining the euro area for the latecomers, that is, the eastern European countries that adopted the euro after 2002. Differently from previous literature, we use NUTS‐2 regions as units of analysis. This novelty allows us to investigate the theoretical predictions of a currency union impact at a more appropriate geographical level. Using a recently developed counterfactual approach, we estimate the overall as well as the disaggregated impact of joining the euro area. We find that the adoption of the euro brought about a small positive effect, which was, however, dampened by the Great Recession. Individual regional estimates suggest heterogeneous returns with benefits accruing mostly to core regions.

Attendance, Completion, and Heterogeneous Returns to College: A Causal Mediation Approach

A growing body of social science research investigates whether the economic payoff to a college education is heterogeneous — in particular, whether disadvantaged youth can benefit more from attending and completing college relative to their more advantaged peers. Scholars, however, have employed different analytical strategies and reported mixed findings. To shed light on this literature, I propose a causal mediation approach to conceptualizing, evaluating, and unpacking the causal effects of college on earnings. By decomposing the total effect of attending a four-year college into several direct and indirect components, this approach not only clarifies the mechanisms through which college attendance boosts earnings, but illuminates the ways in which the postsecondary system may be both an equalizer and a stratifier. The total effect of college attendance, its direct and indirect components, and their heterogeneity across different subpopulations are all identified under the assumption of sequential ignorability. I introduce a debiased machine learning (DML) method for estimating all quantities of interest, along with a set of bias formulas for sensitivity analysis. I illustrate the proposed framework and methodology using data from the National Longitudinal Survey of Youth, 1997 cohort.

Migration, housing constraints, and inequality: A quantitative analysis of China

We investigate the role of migration and housing constraints in determining income inequality within and across Chinese cities. Combining microdata and a spatial equilibrium model, we quantify the impact of the massive spatial reallocation of workers and the rapid growth of housing costs on the national income distribution. We first show several stylized facts detailing the strong positive correlation between migration flows, housing costs, and imputed income inequality among Chinese cities. We then build a spatial equilibrium model featuring workers with heterogeneous skills, housing constraints, and heterogeneous returns from housing ownership to explain these facts. Our quantitative results indicate that reductions in migration costs and the divergent growth in productivity across cities and skills result in the observed massive migration to developed areas. Combined with tight land supply policies in big cities, the expansion of housing demand caused the rapid growth of housing costs and increased inequality between local housing owners and migrants. The counterfactual analysis shows that a migration-based land supply reform with regional transfers or a US-level property tax can lower within-city income inequality by 34% and 21%, respectively. Meanwhile, both reforms lower national income inequality by 20%. However, only the land supply reform encourages more workers to migrate to higher productivity cities.

Heterogeneous Returns to Social Networks: Effects on Earnings and Job Satisfaction in the Chinese Labor Market.

With the advancement of social network research over time, a research consensus has been reached that the use of social networks in job searching can provide positive returns. This study focused on the heterogeneity in the returns to social networks. Using Job Search and Social Networks (JSNET) survey data on urban residents of China, we examined the differences in the propensity to use social networks in job searching and the returns to social networks in terms of job seekers’ earnings and job satisfaction using propensity score stratification and the heterogeneous treatment effects model (HTE model). The use of social networks in job searching was found to be nonrandomly distributed, and the propensity to use such networks varied according to job seeker characteristics. For job seekers with different propensities, the returns to social networks were also different. Moreover, there was negative selection in the instrumental effect of social network use in the job search process but positive selection in the expressive effect: the higher the propensity to use one’s networks, the lower the income return to social networks and the higher the job satisfaction; the lower the propensity to use one’s networks, the higher the income return and the lower the job satisfaction.

Joint Income-Wealth Inequality: Evidence from Lucerne Tax Data

Using tax data from the Swiss canton of Lucerne, we study how measures of economic inequality change if they account for income and wealth rather than income alone. Joint income-wealth, the sum of labor income and annuitized wealth, serves as a measure of combined inequality of income and wealth. Inequality measured using joint income-wealth is higher than measured using income alone. We refine existing annuitization techniques by introducing heterogeneous returns. The joint distribution of labor income and annuitized wealth displays strong tail dependence at the top and a negative association for negative annuitized wealth. A decomposition shows that the underlying marginal distributions of labor income and annuitized wealth account for most of joint income-wealth inequality, whereas their association matters only in the tails.

Explaining differences in the returns to R&D in Argentina: the role of contextual factors

ABSTRACT Argentinean firms’ investments in R&D are well below its regional peers. One potential explanation for this fact is the existence of low and heterogeneous returns for these investments. This paper uses novel microdata to estimate the returns to R&D and analyse the role of contextual factors in shaping its heterogeneity. The findings confirm that returns are indeed heterogeneous and depend on some important factors related to the market context, such as measures of uncertainty; and the knowledge context, such as knowledge spillovers. Acknowledging that heterogeneity of returns depends on firms’ context is crucial for designing innovation policies to boost private R&D returns.

Microeconomic analysis of private returns to education in Egypt: an instrumental variable quantile regression approach

ABSTRACT This study provides updated estimates for the rate of return to an additional year of schooling in Egypt. Additionally, it addresses the major issues of heterogeneous returns and endogeneity of educational attainment. Instrumental variable quantile regression along with other models is employed for that objective. The paper uses the most recent issues of the Harmonized Labor Force Survey and Egypt Labor Market Panel Survey from 2008 to 2018. The findings can be summarized as follows: the returns increase over time up to 2015 then decreases to reach 5.67% in 2018, a number that falls below the global average. Moreover, females’ returns to education are higher than males; the returns are also higher in urban areas compared to rural ones providing an evidence that there exists developmental bias towards urban regions in Egypt. In line with preceding studies, the instrumental variable two-stage least squares estimates are higher than the ordinary least squares’ estimates. Additionally, a confirmation of heterogeneous returns across the wage distribution is presented. The instrumental variable quantile regression estimates exhibit an increasing pattern across the levels of wages. Thus, the less able individuals gain lower marginal profits of education than do the more gifted employees. Indicating complementarity between education and unobservable characteristics and that education may aggravate wage inequality in Egypt. Furthermore, it confirms the presence of the over-education crisis. Moreover, the region-based results in terms of the ability explanation provide that education complements low ability in rural areas while it compensates it in urban ones.

Heterogeneous Returns to Active Labour Market Programs for Indigenous Populations

Heterogeneous Returns to Active Labour Market Programs for Indigenous Populations

Dual Returns to Experience

In this paper we study human capital accumulation and wage trajectories of young workers in a dual labor market. Using rich administrative data for Spain, we follow workers since labor market entry to measure experience accumulated under different contractual arrangements and relate it to current wages. We show that returns to experience accumulated in fixed-term contracts are, on average, lower than the returns to experience acquired in permanent jobs. However, this gap masks significant heterogeneity across individuals. The gap in returns widens along the skill distribution, where workers in the upper tail have the largest difference in returns. Moreover, among equally experienced workers, higher incidence of temporary employment in the past is associated with substantially lower wages. Ultimately, heterogeneous returns to experience translate into significant changes in the position of workers along the distribution of wage growth after 15 years in the labor market, bearing implications for life-cycle wage inequality.

Heterogeneous Returns to Active Labour Market Programs for Indigenous Populations

Heterogeneous Returns to Active Labour Market Programs for Indigenous Populations

Heterogeneous returns to college over the life course.

College graduates earn higher wages than high school graduates by age 30. Among women, the advantages of a college degree decline somewhat as they age, although they are still substantial at age 50; for men, the advantage of a college degree grows throughout the life cycle. Most previous research on returns to higher education has focused on income at a single point in time or averaged over multiple years; our contribution is to study how returns vary by age. We also document how these patterns vary by the propensity of graduating from college. We find modest wage returns for mid-propensity college graduates, but large returns for low-propensity and, for men, high-propensity college graduates. Our results rely on propensity score–based matching combined with multilevel growth curve models applied to data from the National Longitudinal Survey of Youth 1979 cohort.

The joint effects of information and financing constraints on technology adoption: Evidence from a field experiment in rural Tanzania

Low investment in profitable technologies contributes to persistent poverty. Many farmers in developing countries invest too little in fertilizer despite evidence that fertilizer is profitable. This field experiment investigates a two-part explanation: (1) farmers are reluctant to invest without farm-specific evidence of profitability, possibly because of heterogeneous returns, and (2) information is not sufficient to increase investment because of financing constraints. Farmers in one arm of the experiment receive fertilizer recommendations based on tests of their soils, others receive recommendations paired with an input subsidy, and others receive only the input subsidy. Only farmers who receive recommendations and the subsidy increase fertilizer application and yields relative to the control group. The financing constraint may explain limited response to heterogeneous fertilizer recommendations. The approximate net benefit of increased yields, accounting for the full cost of inputs and soil tests, is equivalent to average wages for seven days of work.